Bally Bet Revolt: 'Woeful' Takeover Bid

Written by:
C Costigan
Published on:
Apr/02/2024

  • Company’s share price has declined ~45% over the past year, and its bonds currently trade at a ~28% discount to par.

  • Bally's largest shareholder accused of attempting to acquire company at a fraction of its cost.

  • Company downgraded for the third time in a one week period.

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Bally Bet is the latest US regulated sports wagering company on shaky ground following a shareholders revolt.

K&F Growth Capital, through entities it manages, is a shareholder of Bally’s Corporation (“Bally’s”, NYSE: “BALY”, or “the Company”).  They submitted a letter to the Board of Directors of Bally's Corporation.  Subject: "Recommendation the Special Committee Rejects Standard General’s Woefully Undervalued Proposal to Acquire Bally’s Corporation".

That letter reads, in part: "We hope the recommendations shared here will be seriously considered and adopted by the Special Committee of the Board of Directors as a thoughtful, thoroughly-vetted approach to strengthening Bally’s for the long term.

"Bally’s trades with clear intrinsic undervaluation compared to its potential and, equally, this undervaluation is for an obvious reason: the market has lost confidence in the Company’s current strategy and financial stability. The Company’s share price has declined ~45% over the past year, and its bonds currently trade at a ~28% discount to par. Soo Kim, Chairman of the Company and also Managing Partner of Standard General (Bally’s largest shareholder) proposes to exploit this weakness and acquire Bally’s at a fraction of its fair value, using as a source of funds Bally’s own already overstretched balance sheet. Furthermore, his proposal is counter to the best interests of all stakeholders.

"Shareholders will be denied the opportunity to earn into what may be double the offered value per share; bondholders will be left in an even more levered entity (alongside potentially having valuable assets sold from their collateral); and the incremental leverage will divert precious capital that otherwise could have been invested into the casino resorts to increase revenues, at the expense of employment and tax generation."

On Monday, Massachusetts gaming officials questioned Bally's commitment to the state.

The company suffered its third credit rating downgrade in so many days when Fitch Ratings on Monday lowered its outlook on the casino company from “B+” to “B.”

This follows a Moody's downgrade on March 25 with the credit rating down from B1 to B2.

The company is looking to construct a new casino in both Chicago and Petersburg, Virginia, near Richmond.

“We remain confident in our proposal to construct a world-class casino resort in Petersburg, Virginia,” a Bally’s spokesperson wrote in an email last week to The Progress-Index. “The recent report issued by Moody’s does not hinder anything related to the proposed project.”

The Bally's drama comes at the same time Gambling911.com can reveal that Unibet will officially exit the US sports betting market on May 14 with all customer withdrawal requests to be made no later than the day prior.

- Gilbert Horowitz, Gambling911.com

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