Following the closure of the landmark Tropicana Las Vegas casino 2 April 2024, the owner Bally’s Corporation is looking for the best option to focus its operating strategy in the near future. In the circumstances of the 30% stock decline over the past 12 months, the company is facing ownership issues while looking to raise capital to proceed with the $1.7 billion Chicago-first casino project.
Share Acquisition Offer Rejected:
As reported by CNBC, Bally’s Chairman Soo Kim offered to acquire the company at a price of $15 per share. The Chairman had founded the equity company Standard General and offered a take over through this company at a reportedly $5 per share higher price than the one traded before the offer. As reported, Standard General has a 23% share in Bally’s and submitted an offer to acquire a 100% title over the casino operator.
Investors’ Letter to Bally’s:
But Dan Fetters and Edward King, high-profile investors from K&F Growth Capital, consider that Kim’s offer is below the actual value of the company. Fetters and King, well-known investors in the gaming industry, have sent a letter to Bally’s special committee and urged them to reject Kim’s proposal. According to the source, the investors also propose that Bally’s follows its core casino strategy and focus on Chicago casino and online casino operations rather than insecure ventures, such as the current New York gambling license race for a former Trump golf course or sport betting operations.
Changing Strategy:
The source reports that Bally’s owns 16 casinos in 10 states, as well as sports betting business, but Fetters and King said that the company should move away from high-end casino or online sports betting and gaming operations. They reportedly argue that Bally’s should stop financing the projects that have brought the share price down almost 30% over the last 12 months.
In the letter to Bally’s special committee formed to review Kim’s proposal, Fetters and King explained the reasons behind the proposed strategy.“Moon shot bets on huge, unfunded development projects, failed U.S. online execution, casino resort properties underperforming its regional peers, an overlevered 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 reportedly reads.
According to CNBC, Bally’s saw $69 million in shares repurchases during the fourth quarter of 2023. Commenting the proposed acquisition, Standard General reportedly said that the deal “would allow the Company’s stockholders 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.”
Capital Allocation Plan:
Fetters and King’s letter rejects this plan and proposes a few crucial changes in Bally’s strategy. The investors reportedly suggest that the company brings a ”better-equipped” partner for the $1.7 billion Chicago casino project, where the company was looking for $800 million in finances. Fetters and King further propose that Bally’s sells its Tropicana operations on the Strip, stop financing the New York City golf course, and exclusively focus on digital casino operations. According to CNBC, the high-profile investors consider that these changes may bring benefits to the company with a current market cap standing at around $500 million.