New York hedge fund Standard General, founded by Bally’s Corp. chairman Soohyung Kim, has offered to buy the rest of the casino and gambling company’s outstanding shares at a $2.07 billion valuation.
Already the largest shareholder in Bally’s (NYSE: BALY), Standard General is offering to purchase the remaining 42.96 million shares at $38.00, a 30% premium on its closing price on Monday. Bally’s shares are up 24% Tuesday morning on the news.
Formerly Twin River Worldwide Holdings, Bally’s owns and operates more than a dozen casinos, and is looking to navigate a hyper-competitive U.S. sports betting industry. That’s proved tough for a number of public companies in the industry that have seen massive sell-offs in the last few months.
“Our proposed transaction would allow the Company’s stockholders to immediately realize an attractive value, 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 public company,” Kim wrote in a note announcing the takeover offer.
Kim has been chairman of Bally’s since 2016. He is the founding partner of Standard General, and also serves as the fund’s managing partner and chief investment officer. That $2.07 billion in equity value would be larger than all of Standard General’s assets under management, which were listed at $1.8 billion in its most recent regulatory filing.
“We intend to fund the transaction through sale and lease back and other long-term financing arrangements,” Kim said in the proposal. That means the hedge fund would sell some or all of Bally’s real estate for an immediate cash infusion, while entering a long-term deal to rent the properties back from the buyers. These sale lease-backs have become more common in gambling in recent years, with Penn National Gaming (Nasdaq: PENN) and Blackstone (NYSE: BX) notable buyers of properties.
Twin River purchased the Bally’s name in October 2020, followed by a series of acquisitions, including fantasy platform Monkey Knife Fight ($90 million), tech platform Bet.Works ($125 million) and pricey naming rights to 21 of Sinclair’s regional sports networks. The group has also made casino acquisitions and purchased the AVP, the country’s leading beach volleyball tour. Bally Bet is available in Colorado, Iowa, Indiana and Virginia.
The proposed transaction is subject to approval by the company board, which Kim manages. He said in his letter that the group would only move forward if the board appoints a special committee of independent directors to consider the offer. He also said that if a deal isn’t reached, Standard General intends to remain a sizable investor in the company.
Standard General’s assets include about 5% of Cumulus Media, which owns local sports radio stations around the country, and about 13% of Turning Point Brands, a tobacco company. The fund used to own Aliante Hotel and Casino in Las Vegas, and Kim is on the board of managers at ALST Casino Holdco LLC.