Bally’s Chairman Soo Kim is once again making a play to take the parent of Bally Bet private for a fraction of his previous offer.
Kim’s hedge fund Standard General, which owns roughly 23% of Bally’s, announced a bid on Monday to buy the rest of the company for $15 per share. Standard General is Bally’s’ largest shareholder.
The market reacted strongly to the offer as the stock jumped 28.5% to $13.65 at close Monday with volume nearly eight times its average.
A $2 billion valuation to $684 million
The latest bid is roughly 41% higher than where Bally’s shares closed Friday, valuing the company at $684 million.
However, it is 65% less than what Standard General proposed in 2022, when it offered to buy Bally’s for $38 a share, valuing the company at $2 billion with a 30% premium on the stock. Rejecting the offer, Bally’s opted to buy back $103 million of its own stock through a Dutch auction and double down on online sports betting and iGaming instead.
Bally’s recently lowered EBITDA guidance for 2024, which management attributed to delayed casino openings and foreign exchange headwinds. Its stock price is roughly 85% off of its all-time high. Its online sports betting app, meanwhile, is recovering from a disastrous last few years.
Bally Bet under new management
Bally Bet switched over to third-party technology from Kambi and White Hat last year after spending more than $3 billion on acquisitions that resulted in a “noncompetitive” product, as CEO Robeson Reeves put it at the time. Those missteps resulted in a $390.7 million non-cash impairment in the fourth quarter of 2022.
Bally Bet represented less than 1% of market share in virtually every state it operated in at the time of the switch and most recent reports from states show not much has changed since. In Arizona, for example, 0.15% of the money bet in December was on Bally Bet.
Arizona was one of the few states where Bally Bet did not go offline during the rebrand and was a focal point for the company after it rejected Standard General’s last bid.
The switch, which involved laying off roughly 300 employees, is intended to make Bally Bet EBITDA breakeven by 2025.
Status quo most likely outcome, analyst says
Standard General’s proposed transaction would be subject to approval by Bally’s board of directors, which is expected to appoint a special committee for review. But Jeffrey Stantial of Stifel believes the board may see a near-term path to more than $15 per share.
In a note on the bid, Stantial described several issues that have kept investors skittish as potentially short-term headwinds, based on management’s recent commentary. More specifically, he sees the attitude towards online gambling in Japan and financing requirements for its Chicago casino as most likely to improve this year.
Chad Beynon of Macquarie cited the Chicago facility as “the polarizing issue” and estimates a permanent facility there could generate around $250 million of EBITDA.
Stantial added that the offer could spark interest from other suitors, but said a lack of financing details from Standard General and historical precedent suggest that Kim’s firm is unlikely to up its price.
Bally’s has access to more sports betting states
Bally Bet is currently live in seven states:
- Arizona
- Colorado
- Indiana
- Iowa
- New York
- Ohio
- Virginia
It has access to sports betting licenses in 11 more states, according to its website. Bally’s also owns 16 casinos, a golf course in New York and a horse track in Colorado. It has iGaming in New Jersey, Pennsylvania and Rhode Island.
