Bally’s shareholders urged to pursue break up strategy over chairman’s bid

Bally’s shareholders are being urged to reject the $15 per share takeover offer from Standard General in favour of a strategy that would sell off a number of the company’s assets.

K&F Growth Capital, which owns less than one per cent of the shares in Bally’s Corp., describes the offer from Standard General as “woefully undervalued” and accuses Standard General managing partner and Bally’s chairman Soo Kim of attempting to “pick off the company on the cheap”.

Instead, K&F Growth Capital wants to pursue a strategy that could see Bally's exit Las Vegas, seek an operating partner in Chicago, drop its bid for a casino license in New York, and offload its interactive gaming assets.

“Bally’s trades with clear intrinsic undervaluation compared to its potential and, equally, this undervaluation is for an obvious reason: the market has lost confidence in the company’s current strategy and financial stability,” K&F Growth Capital partners Dan Fetters and Edward King wrote in a letter to Bally’s shareholders Tuesday.

“The company’s share price has declined ~45% over the past year, and its bonds currently trade at a ~28% discount to par. Soo Kim, chairman of the company and also managing partner of Standard General (Bally’s largest shareholder) proposes 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.”

K&F is urging Bally’s shareholders to reject the offer from Standard General and has proposed a plan to refocus the business on regional casino operations.

This would see the company end its pursuit of one of the three available casino licenses in New York City, find a potential operating partner or acquiror for its development project in Las Vegas, and immediately pursue operating partnership conversations for its proposed casino in Chicago.

K&F also proposes a sell off of Bally’s international interactive assets and recommends limiting its interactive business in the United States to an amenity offering in sports with a focus on online social casino gaming.

“The strategy employed over the last three years has been an unmitigated disaster,” K&F say of Bally’s interactive strategy. “Three acquisitions (SportCaller, Bet.Works, Monkey Knife Fight) for in aggregate over $300 million, the to-be-abandoned Sinclair partnership (in which Bally’s granted penny warrants for Sinclair to acquire a 15% ownership stake), and cumulative operating losses to-date exceeding $125 million, have combined yielded <1% market share in sports betting and 2-3% share in casino. Management is forecasting continued material losses in 2024. We cannot continue to throw good money after bad.”

“Enacting the steps above and utilizing the monetization proceeds and optimized margin performance to materially de-lever the balance sheet puts Bally’s in a position to execute on a strategy not too dissimilar to that the company employed prior to 2020: acquire strategically compelling and synergistic land-based casino resort assets,” Fetter and King conclude.

“We believe our straightforward plan to strengthen Bally’s serves all its stakeholders – employees, management, fellow shareholders, and debtholders. This plan will reduce debt, increase profitability, and create significant shareholder value.”

K&F managing partners Fetter and King are also managing partners of Acies Investment alongside former MGM Resorts chairman Jim Murren and Chris Grove of Eilers & Krejcik Gaming.

Acies Investment’s portfolio includes online sports betting provider Simplebet, online sports betting operator Underdog Sports, online sports betting trading exchange Sporttrade, in-play sports betting pricing platform Angstrom, and social gaming operator High 5 Casino.

Other recent investments include a stake in AML and compliance software provider Kinectify, and fantasy sports operator Basketball Forever.