Standard General’s bid to acquire Bally’s Corporation has encountered resistance from rival shareholder K&F Growth Capital, which asserts that the offer grossly undervalues the company.
In contrast to Standard General’s proposal, K&F has advocated for a major strategic reset, emphasizing the sale of Bally’s interactive assets and a shift away from costly developments in markets such as Chicago, Las Vegas, and New York.
Bally’s Chairman Soo Kim, along with Standard General, his private equity firm, recently proposed a bid to privatize the company at $15 per share, surpassing the prior market value of around $10 per share. With Standard General already holding a 23% stake in Bally’s, the offer has drawn both support and opposition from prominent investors.
Dan Fetters and Edward King of K&F Growth Capital, in a letter to the special committee assessing Kim’s bid, advocated against the proposal, suggesting a shift back to Bally’s core casino operations, CNBC reported. They critique the company’s diversification into high-end casinos and online gaming ventures, attributing the declining share price and market capitalization to such endeavors.
Bally’s, with 16 casinos across 10 states and a digital gaming arm, has ambitious plans including the development of Chicago’s inaugural casino, a new resort in Las Vegas, and a bid for a gambling license at a former Trump golf course in New York City.
Fetters and King propose strategic adjustments, advocating for a stronger partner for the Chicago project, potentially Hard Rock International, and divestment of non-core assets such as the Tropicana operations in Las Vegas and the New York City golf course.
Over the past year, the company’s stock has experienced a notable decline, plummeting nearly 30%.
“Kim proposes to exploit this weakness and acquire Bally’s at a fraction of its fair value,” Fetters and King said in the letter, as per the report.
“Moon shot bets on huge, unfunded development projects, failed U.S. online execution, casino resort properties underperforming its regional peers, an over-levered balance sheet with little near-term prospects for de-levering and irresponsible capital allocation decisions have driven the stock and bonds to a point of disinterest from the investing community,” the letter reads.
Despite its legacy brand, Bally’s has struggled to assert dominance beyond regional casinos, evident in its declining market cap, which presently stands at just over half a billion dollars.
This isn’t the first time Kim has pursued privatization; a similar offer was made in January 2022 at $38 per share when the stock traded at $26.
While K&F Growth Capital holds a minimal stake in Bally’s, Fetters and King, seasoned venture capitalists within the gaming industry, bring substantial insight into the ongoing strategic debates.
