Bally Bet, the digital arm of Bally’s Corp., hoped to get on the bandwagon that is online sports betting in New York. Everyone is gushing over the numbers rolling out of New York for its launch January 8.
But the numbers can be misleading. Where is the profit? Eaten up in free giveaways and promotions and advertising, splurges in the name of signing up customers. Bally Bet will be back to New York in April, according to corporate chairman Soo Kim.
But a more immediate issue concerns Kim.
On January 25, Standard General—Bally’s largest shareholder—unfolded an offer to buy Bally’s and take it private. The New York-based investment firm whose founding partner and chief investment officer, is the very same Soo Kim, owns just under 21 percent of Bally’s stock, according to CDC Gaming Reports.
The proposed deal is valued at more than $2 billion. The announcement caused shares to rise 20 percent to $36.76 a share.
In a letter to the Bally’s board of directors, Standard General outlined the details. The arrangement calls for the company to acquire “outstanding shares of common stock of Bally’s Corp. we do not own for a price of $38 per share. Our proposal represents a 30 percent premium to the company’s closing price as of January 24, which we believe offers compelling value to Bally’s stockholders.”
rote that the proposed transaction would allow the company’s stockholders “to immediately realize an attractive value in cash for their investment” without worrying about the risky business of gambling.
“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,” the letter said. “We will not move forward with the transaction unless it is approved by such a special committee.”
“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,” the letter said.
Standard General has a long history with Bally’s Corp. and its predecessor. As such it understands its business, assets, and other factors so it can close on the deal quickly, the company wrote.
“We intend to fund the transaction through sale and lease back and other long-term financing arrangements,” the letter said.
If the deal goes south, Standard General remains a long-term stockholder.
David Katz, an analyst with Jefferies Equities Research, said, “The go-private offer highlights our view that the market is presently not pricing in value for digital gaming growth in the U.S., which suggests the $38 offer reflects the current value of the land-based business and the Gamesys earnings stream per our last model. In October, Bally’s completed a $2.7 billion acquisition of Gamesys Group, the U.K. online gaming operator.
“However, the market has grown increasingly competitive among larger operators with considerable resources and Bally’s would be entering a partially formed landscape, which suggests our $16 per share in future digital value is longer term in nature than some peers,” Katz said
Barry Jonas, an analyst with Truist Securities, said the $38-per-share offer price (which compares to their $55 price target) “would likely leave several minority shareholders underwater. We note Gamesys shareholders who elected stock consideration in October 2021 received BALY stock at $66/share. While it’s unclear to us if a deal gets done at $38, we see this as an opportunistic move by Standard General, given the market continues to re-rate lower.”
One of the possible fallouts is missing the Super Bowl with Bally Bet. But Soo Kim told CNBC’s Contessa Brewer that Bally’s is fine with missing the lucrative Super Bowl wagers.
“We have a longer-term plan,” he said. “We want to buy, and we disagree with the market. We are willing to put our money where our mouth is. We are excited about the business. We’re buying not because we think it will be worth more tomorrow, we’re offering to purchase because we think it will be worth a lot more in the near future.”
Based in Providence, Rhode Island, Bally’s has 14 casinos in ten states, it owns and manages a horse racetrack in Colorado and has access to off-site betting licenses in 15 states, according to its website.
The company acquired global online gaming operator Gamesys Group last year, and owns Bally Interactive, a sports betting platform. It also owns Monkey Knife Fight, a fantasy sports site, as well as SportCaller, a B2B free-to-play game provider and Telescope Inc., which enables fans to engage with live events, according to Elite Sports New York.
The company, which purchased Bally’s Atlantic City from Caesars, then changed its corporate name to match the hotel casino in Atlantic City. Bally’s has 10,000 employees and operates more than 15,800 slot machines, 500 table games and 5,300 hotel rooms.
In its most recent quarterly earnings, Bally’s posted a net loss of $14.7 million on revenue of $314.8 million, compared with income of $6.72 million and revenue of $116.6 million a year ago.
The Bally’s story goes back to 1932 when Bally Manufacturing was created and developed pinball machines, according to Gamblingsites.com. The company later moved into the slot machine business. Bally later signed distribution agreements with the Japanese maker of the early arcade videogames “Pac-Man” and “Space Invaders.”
The company opened Bally’s as the second casino in Atlantic City. In 1996, Hilton Hotels purchased the firm in an all-stock deal worth more than $2 billion, and later Harrah’s Entertainment acquired the hotel casino. Harrah’ became Caesars Entertainment. In 2020, Twin River Worldwide Holdings acquired Bally’s.
