{"id":316168,"date":"2024-04-02T15:15:39","date_gmt":"2024-04-02T20:15:39","guid":{"rendered":"https:\/\/www.casino.org\/news\/?p=316168"},"modified":"2024-04-03T10:27:51","modified_gmt":"2024-04-03T15:27:51","slug":"ballys-investor-kf-growth-urges-against-takeover-bid","status":"publish","type":"post","link":"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/","title":{"rendered":"Bally\u2019s Investor Urges Against Takeover Bid, Suggests Alternatives for Chicago Casino"},"content":{"rendered":"

K&F Growth Capital, which is one of the largest Bally\u2019s (NYSE: BALY) shareholders, sent a letter to the company\u2019s board of directors on Tuesday urging it to reject a recently proposed takeover bid and to mull alternatives for large-scale projects, including a Chicago casino hotel.<\/p>\n

\"bally's\"
Bally’s on the Atlantic City Boardwalk. An investor is urging the operator to reject a takeover offer. (Image: Press of Atlantic City<\/em>)<\/figcaption><\/figure>\n

Noting that Bally\u2019s stock is undervalued, K&F said the $15 per share acquisition offer<\/a> proposed last month by Standard General, the hedge fund controlled by Bally\u2019s director Soo Kim, is an effort by the suitor to capitalize on weakness in the stock to buy the gaming company \u201cat a fraction of its fair value, using as a source of funds Bally\u2019s own already overstretched balance sheet.\u201d<\/p>\n

Shareholders will be denied the opportunity to earn into what may be double the offered value per share; bondholders will be left in an even more levered entity (alongside potentially having valuable assets sold from their collateral); and the incremental leverage will divert precious capital that otherwise could have been invested into the casino resorts to increase revenues, at the expense of employment and tax generation,\u201d wrote the money manager.<\/p><\/blockquote>\n

Current sentiment indicates Bally\u2019s is unlikely to accept the offer<\/a>, though some analysts argue it probably should. The company has formed a special committee of independent directors to evaluate the bid, and recently hired an investment bank and a law firm to assist in the process.<\/p>\n

While acknowledging Standard General is attempting to exploit weakness at the company in which it is the largest shareholder, K&F chided Bally\u2019s for \u201cmoon shot bets\u201d on large casino projects, flawed online gaming moves, some lagging regional casinos, and buying back $69 million worth of stock in the fourth quarter instead of deleveraging the balance sheet.<\/p>\n

Bally\u2019s Should Reject, Refocus, Says K&F Growth<\/h2>\n

K&F Growth Capital pointed out that Bally\u2019s has some solid regional casinos in its portfolio. As such, the operator should reject the Standard General bid and refocus on core competencies over expensive, grandiose projects in Chicago, Las Vegas, and New York.<\/p>\n

\n

In less than two months, all three major ratings agencies have downgraded Bally\u2019s credit grade<\/a> further into junk territory, highlighting elevated leverage that could further expand as the operator seeks $800 million to complete its Chicago casino hotel.<\/p>\n<\/div>\n

K&F said the Chicago, Las Vegas, and New York ventures have been distractions to Bally\u2019s management at a time when the firm\u2019s earnings before interest, taxes, depreciation, and amortization (EBITDA) margins badly trail those of rival regional casino operators.<\/p>\n

Bally\u2019s core casino operating margin performance materially lags peers, generating 400bps+ lower EBITDA margins than several regional competitors. Each 100bps of margin is roughly equivalent to $15 million of EBITDA,\u201d added K&F.<\/p><\/blockquote>\n

The asset manager said an increase of 400 basis points in EBITDA margins would equate to a $7 jump in the share price, which \u201cis owed to the public shareholders, not to Standard General post having acquired the Company for a low-ball offer.\u201d<\/p>\n

Proposed Tactics for Bally\u2019s in Big Cities<\/h2>\n

Of Chicago, Las Vegas, and New York, the Windy City project<\/a> is the most feasible and tangible for Bally\u2019s, prompting K&F to say the gaming company should pursue a partner for the integrated resort. A partnership could create value argues the asset manager, noting some analysts are suspect of Bally\u2019s ability to generate adequate return on invested capital on its own in Chicago.<\/p>\n

\n

Regarding Las Vegas, where the Tropicana closed Tuesday morning and will be demolished later this year, K&F said it believes Bally\u2019s should sell the operating rights to the venue because it doesn\u2019t have the ability to fund redevelopment there while also tending to Chicago and pursuing a New York casino license.<\/p>\n<\/div>\n

\u201cNew York: our strategy is simple — as we believe it is highly unlikely Bally\u2019s wins one of the three down-state New York licenses and the pursuit of the license is an enormous management distraction and financial cost, Bally\u2019s should immediately withdraw its application to refocus management on core operations,\u201d observed the money manager.<\/p>\n

Ideas for Bally\u2019s Online Operations<\/h2>\n

Through a series of acquisitions, Bally\u2019s built an expansive portfolio of domestic and international<\/a> online gaming assets, but missteps along the way hindered the operator\u2019s ability to adequately capitalize on those purchases.<\/p>\n

K&F Growth Capital proposed the company sell its noncore international digital assets, noting such a move would likely receive widespread interest among potential suitors and could assist in paring debt. The asset manager said US investors don\u2019t properly value Bally\u2019s international online gaming exposure and that could be a negative factor in terms of the company\u2019s ability to access capital.<\/p>\n

In calling Bally\u2019s approach to US iGaming and sports betting \u201can unmitigated disaster,\u201d K&F implored the company to halt future investments in online sports wagering and focus on bringing something unique to the internet casino space.<\/strong><\/p>\n

\u201cWe cannot continue to throw good money after bad. Bally\u2019s should curtail all online sports activity to a business that is purely an amenity offering (akin to Boyd) and employ a holistic rethink of all online casino to focus all activities on the core physical-casino customer,\u201d opined K&F.<\/p>\n","protected":false},"excerpt":{"rendered":"

K&F Growth Capital, which is one of the largest Bally\u2019s (NYSE: BALY) shareholders, sent a letter to the company\u2019s board of directors on Tuesday urging it to reject a recently proposed takeover bid and to mull alternatives for large-scale projects, including a Chicago casino hotel. Noting that Bally\u2019s stock is undervalued, K&F said the $15 […]<\/p>\n","protected":false},"author":46,"featured_media":240716,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[10,81886,32093,86430,86438],"tags":[81903,90095,86455,86457],"acf":[],"yoast_head":"\nBally's Investor K&F Growth Urges Against Takeover Bid<\/title>\n<meta name=\"description\" content=\"Bally\u2019s Investor Urges Against Takeover Offer, Suggests Alternatives for Chicago Casino.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bally's Investor K&F Growth Urges Against Takeover Bid\" \/>\n<meta property=\"og:description\" content=\"Bally\u2019s Investor Urges Against Takeover Offer, Suggests Alternatives for Chicago Casino.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/\" \/>\n<meta property=\"og:site_name\" content=\"Casino.org\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Casino.OrgNews\" \/>\n<meta property=\"article:published_time\" content=\"2024-04-02T20:15:39+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-04-03T15:27:51+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/11\/bally.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"873\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Todd Shriber\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@etfgodfather\" \/>\n<meta name=\"twitter:site\" content=\"@Casino_Org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Todd Shriber\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/\",\"url\":\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/\",\"name\":\"Bally's Investor K&F Growth Urges Against Takeover Bid\",\"isPartOf\":{\"@id\":\"https:\/\/www.casino.org\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/11\/bally.jpg\",\"datePublished\":\"2024-04-02T20:15:39+00:00\",\"dateModified\":\"2024-04-03T15:27:51+00:00\",\"author\":{\"@id\":\"https:\/\/www.casino.org\/news\/#\/schema\/person\/f4cecf70a5032bc4e60eb73fc86d4a85\"},\"description\":\"Bally\u2019s Investor Urges Against Takeover Offer, Suggests Alternatives for Chicago Casino.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.casino.org\/news\/ballys-investor-kf-growth-urges-against-takeover-bid\/#primaryimage\",\"url\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/11\/bally.jpg\",\"contentUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/11\/bally.jpg\",\"width\":1200,\"height\":873,\"caption\":\"Bally's on the Atlantic City Boardwalk. 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