Bally’s Corporation has agreed to a merger with its largest shareholder, Standard General, in a deal that assesses the gambling operator’s enterprise value at $4.6 billion. Standard General, which already owns about 23% of Bally’s, will pay $18.25 per share for the rest of the company. Stockholders not wishing to sell at that price can roll their shares over for a stake in the combined company.
The possibility of a takeover has been on the table since Bally’s first existed in its current form Bally’s Corporation 17,84 +0,85%. Standard General and its founder, Soo Kim, were instrumental in the company’s evolution. Bringing the company entirely under Standard General’s control is the natural endpoint of that series of deals.
Although the Bally’s name has been around in the gaming space for the better part of a century, the company currently using it is a relatively recent combination of two others. In 2020, the retail casino company formerly known as Twin River Worldwide Holdings acquired the name along with the Bally’s Atlantic City retail property from Caesars Entertainment.
Acquiring that property gave Twin River—now using the Bally’s name and with Kim as Board Chairman—access to the New Jersey online casino and sports betting market. That company then merged with online gambling software developer GameSys to secure the expertise and in-house platform to begin online operations.
In today’s acquisition announcement, Kim said:
The Transaction provides Bally’s stockholders with a significant cash premium along with certainty of value for their investment or, if they elect to retain their shares, the opportunity to participate in the longer-term growth prospects of our expanded portfolio and significant development pipeline. The addition of the complementary QC&E assets builds upon the Company’s attractive growth profile.
Mixed Results for Bally’s in the Online Era
Like many other companies, Bally’s found the US sports betting space more challenging than it had anticipated. Its in-house platform was costly to maintain and wasn’t well-received by players. Last year, it temporarily shut down its Bally Bet operations in order to reboot them with a third-party platform supplied by Kambi.
Several waves of layoffs ensued at Bally Interactive, affecting mostly former GameSys employees.
At the same time, Bally’s announced it would be focusing more energy on its iGaming product, Bally Casino. At that point, that brand was only active in New Jersey. It subsequently launched as a qualified gaming entity in Pennsylvania, although that status prevented it from launching its sportsbook. The new Bally’s-operated satellite casino to be built in State College may eventually give it access to Pennsylvania’s sports betting market.
Somewhat surprisingly, Bally’s hasn’t made a play for a Michigan online casino license on either of the occasions that opportunity has presented itself. However, its biggest success in the online casino space has been to persuade Rhode Island to legalize online casinos, with itself as the monopoly operator.
Granted, Rhode Island is a small market, and revenue there hasn’t been up to expectations. However, having exclusive access means Bally’s has a way to monetize its online casino product that isn’t contingent on engaging in a promotional arms race with the likes of DraftKings, FanDuel, and BetMGM.
On the retail front, Bally’s has secured the funding to make a high-stakes gamble on a downtown Chicago casino resort. That may pay additional dividends if Illinois online casinos ever become a reality, though that currently seems like a distant prospect.
Sale Price Less Than Half of First Offer
The $18.25 price that Bally’s has agreed to is a significant step up from the $15 that Standard General offered in March. At the same time, however, it’s considerably less than the $38 per share Bally’s shareholders would have received had they accepted its first offer in 2022.
As of its last earnings update, Bally’s had 40.5 million shares outstanding, so $18.25 implies a market capitalization value of around $740 million. The reason for the discrepancy between this and the $4.6 billion enterprise value cited by Standard General is the company’s debt. Although Bally’s assets and future revenue are substantial, so are its liabilities, largely because of the commitment to the Chicago project.
In 2022, hopes were high for Bally Interactive and the US online gambling industry in general. Expectations have been lowered across the board over the past two years, which is reflected in the final sale price.
Bally’s share price dropped by a factor of 10 from its all-time high of $73.63 in March 2021 to a low of $7.28 in November 2023. Standard General’s March takeover offer resulted in a bounce of about 28%, and today’s news has produced another jump of 25%.