Bally’s Chairman Soo Kim has proposed taking the company private through his hedge fund, Standard General. But Dan Fetters and Edward King, managing partners at K&F Growth Capital, said Bally’s shareholders should reject Kim’s bid and “immediately” partner with a more experienced gambling operator to complete Bally’s $1.7 billion Chicago casino in River West.
In a letter to Bally’s board of directors that was also published as a press release, Fetters and King wrote that Kim’s bid “jeopardizes the completion of the Chicago project, putting at further risk gainful employment and tax generation in Illinois.”
Calling the bid “woefully undervalued,” the investors wrote that a buyout from Standard General “would only reduce the company’s capacity to finance and pursue the project, to the detriment of the Chicago community and the state of Illinois.”
Fetters and King, who are major venture capitalists in the gaming industry, noted the Chicago casino is one of many “moon shot bets on huge, unfunded development projects” Bally’s is struggling with across the U.S. They added the company also is redeveloping the Tropicana on the Las Vegas Strip and competing for a new casino in New York.
Kim has said a buyout would allow shareholders “to immediately realize a premium price, in cash, for their investment and provides stockholders 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 publicly-listed company.”
He offered a takeover bid of $15 per share, which is less than half the $38-per-share buyout he offered in 2022, just before former Mayor Lori Lightfoot chose Bally’s for the Chicago casino license.
Kim’s Standard General owns 26 percent of Bally’s, which ended 2023 with $163.2 million in cash and $3.6 billion in debt. The Fetters and King fund owns less than 1 percent of Bally’s. The company has formed a committee to evaluate Kim’s offer; previously officials said the company is considering “potential strategic alternatives” to Kim’s proposal.
Moody’s and Fitch both have downgraded Bally’s credit since March, and S&P Global cited “development and execution risks” for the company. Still, according to Bally’s Chief Financial Officer Marcus Glover, the company is positive it will close a “funding gap” of about $800 million on the Chicago project and breaking ground on the permanent casino this summer−even though the company has not announced a new location for the hotel tower, which, under the original plan, would have damaged city water pipes.
The temporary Bally’s casino, which opened last September at the historic Medinah Temple, has become one of the state’s largest casino attractions, but has generated only $4.3 million for Chicago pension funds, way below Lightfoot’s original projections.
Bally’s is committed to investing $1.7 billion in the Chicago project and is contractually obligated to spend at least $1.34 billion under the host city agreement signed by Lightfoot’s administration. Currently the company needs to spend $1.1 billion to meet its obligations, according to Bally’s officials.
Advisers to Chicago Mayor Brandon Johnson said the mayor has no worries about the situation. They said he believes “Bally’s is going through the normal financing process. Therefore, we have no concerns at this time.”
