Back in March, Standard General, a company that currently holds a significant 23% stake in Bally’s Corporation, the leading gaming and entertainment company, disclosed its intentions to acquire all outstanding shares in Bally’s. This became clear from a filing with the US Securities and Exchange Commission (SEC). This non-binding letter proposed a price of $15 per share for the outstanding shares of Bally’s, a premium of 41% of the closing share price for the company as of March 8, 2024.
Now, one of the shareholders in Bally’s, K&F Growth Capital, an asset management firm founded by Dan Fetters and Edward King, sent a letter to the company’s Board of Directors, expressing their concern about Standard General’s bid, among other issues. In the letter, K&F Growth Capital said that Standard General’s bid was woefully undervalued. The company also warned that the Board should not let Bally’s Corporation’s takeover for a cheap, saying that this is not in the best interest of its shareholders.
Over the last year, Bally’s shares have seen a growing decline and now trade at approximately 45% less with its bonds trading at a discount of nearly 28%, K&F Growth Capital said. According to the company, Standard General and Bally’s chairman, Soo Kim, propose to “exploit this weakness and acquire Bally’s at a fraction of its fair value, using as a source of funds Bally’s own already overstretched balance sheet.” Besides countering the best interest of all stakeholders, the proposed bid will effectively deny the opportunity for the stakeholders “to earn into what may be double the offered value per share,” wrote K&F Growth Capital.
Change in Strategy Needed
Considering the aforementioned facts, the company encouraged Bally’s to reject the bid from Standard General. The company also criticized the ongoing strategy of the gaming and entertainment operator. It said that Bally’s Corporation’s strategy alienated investors, resulted in overleveraged balance sheets and engaged in high-risk projects. Addressing some of the challenges Bally’s is facing, K&F Growth Capital proposed a number of changes to the company’s strategy for projects such as the ones in New York, Las Vegas and Chicago.
Writing about the efforts of Bally’s in New York, K&F Growth Capital encouraged the company to “immediately withdraw its application to refocus management on core operations.” When it comes to Las Vegas, the entertainment and gaming company was encouraged to start discussions with potential operating partners. This project involved the transformation of the Tropicana.
Addressing Bally’s Chicago project, K&F Growth Capital wrote that the company should “immediately pursue operating partnership conversations.” Finally, K&F Growth Capital predicted that if Bally’s goes private, it may lose its ability to finance and pursue the project.