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Standard General has offered Bally’s stakeholders a 30% premium on the closing price of stock to acquire all remaining shares

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Standard General, a New York-based investment company whose founder is also Bally’s Chairman, has made an offer of about $2b to purchase the shares it doesn’t already own in the company and take Bally’s private.

Standard General’s Chief Investment Officer Soo Kim offered the Bally’s board $38 per share, a 30% premium on the closing price of the stock as of January 24th prior to the announcement. Stock prices surged some 20% on the news to hit a high of $36.76 after registering a low of $26.40. The stock price has swung wildly racing a peak of $75.92 and a low of $26.11 over the previous 52-week period.

Friendly Offer From Current Chair

Standard General currently owns more than 20% of Bally’s stock and Soo Kim noted in the announcement that an acceptance of the offer would let existing stockholders “immediately realize an attractive value in cash for their investment” as well as build-in “certainty of value for their shares, especially when viewed against the operational risks inherent in the company’s business and the market risks inherent in remaining a public company.”

He added inter alia, “Our proposal represents a 30% premium to the company’s closing price as of Jan. 24th, which we believe offers compelling value to Bally’s stockholders.”

Far from appearing to be a hostile takeover bid, the sale would be subject to non-waivable conditions that require approval of holders of a majority of the shares not already owned by Standard General or its affiliates. The proposal is subject to approval by Bally’s Board of Directors.

The letter also said: “It is our expectation that the Board of Directors will appoint a special committee of independent directors to consider our proposal and make a recommendation to the Board of Directors.

“We will not move forward with the transaction unless it is approved by such a special committee.”

The letter went on to paint a picture of a trouble-free and potentially quick acquisition thanks to the offering firm’s intimate knowledge of Bally’s company.

Finally, given our existing position and history with the company, we will not need to do any due diligence to enable us to be in a position to negotiate and execute mutually acceptable definitive documentation,” said the letter.

In a final warm and fuzzy acknowledgment that there is nothing inherently hostile in the desired acquisition, Standard General said it would remain a long-term stockholder even if the deal is not approved or eventually consummated.

Some Small Investors Wouldn’t Do Well

Positioning for extended reach into emerging US online regulated markets, Bally’s acquired UK online operator with operations in the USA through Tropicana Atlantic City online, Gamesys for $2.7b near the end of last year. Gamesys stakeholders received Bally’s stock at $66 per share in October and the deal could leave them underwater if they go along with it. Competition in the US online marketplace has heated up considerably over the last few months and so has the pace of M&A consolidating key parts of the industry.

Ballys also operates sports betting in the US and some analysts consider the offer price of $38 per share to only take into consideration the value of Bally’s land-based business and the Gamesys revenue stream.

David Katz, an analyst with Jefferies has a target price of $55 on Bally shares. It’s unclear as to why the stock isn’t performing to that level on the street but the opportunities seem to be built in while the share price offer from Standard General seems to ignore the target and seeks a sweetheart deal while share prices are depressed.

Source: Bally’s soars after Standard General fires off an acquisition offer, Seeking Alpha, January 25, 2022