Bally's investors oppose takeover bid, suggest alternatives to Chicago casino
K&F Growth Capital, one of Bally's (NYSE: BALY ) largest shareholders, today sent a letter to the company's board of directors asking it to reject a recent takeover bid and consider alternatives for major projects, including a Chicago hotel and casino.
K&F noted that Bally stock was undervalued and said a $15-a-share takeover bid last month by Standard General, a hedge fund controlled by Bally director Soo Kim, was an attempt by the applicants to take advantage of the stock's weakness by " Acquiring the gaming company for a fraction of its fair value and using Bally's own already stretched balance sheet as a source of financing."
Shareholders are deprived of the opportunity to earn twice the value of each share issued; bondholders will be faced with a more indebted company (in addition to selling valuable assets in its collateral); additional leverage will divert investments that could otherwise be made in the casino The resort’s valuable capital, increasing revenue at the expense of jobs and tax revenue,” the asset managers wrote.
Current sentiment suggests Bally's is unlikely to accept the offer, although some analysts think it probably should. The company has formed a special committee of independent directors to evaluate the takeover bid and recently hired an investment bank and a law firm to assist in the process.
While K&F acknowledged that Standard General was trying to exploit the weaknesses of the company in which it is its largest shareholder, it condemned Bally's for its "moon bets" on major casino projects, flawed online gaming efforts, some troubled area casinos and $69 worth of backlogs. It purchased 1 million more shares in the fourth quarter rather than deleveraging its balance sheet.
K&F Growth says Bally’s should fade and refocus
K&F Growth Capital notes that Bally's has some solid regional casinos in its portfolio. The operator should therefore reject standard generic offers and instead focus on its core competencies rather than expensive and ambitious projects in Chicago, Las Vegas and New York.
In less than two months, all three major credit rating agencies have downgraded Bally's credit rating further to junk territory, citing the risk of debt as the operator spends $800 million to complete its Chicago casino-hotel ambitions. Keep growing.
K&F said the joint ventures in Chicago, Las Vegas and New York distracted Bally's management at a time when the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) margins were significantly lagging those of rival regional casino operations. business.
"Bally's core casino operating margins lag significantly behind those of its competitors, and its EBITDA margins are more than 400 basis points lower than several regional competitors." K&F added that each 100 basis points margin equates to approximately $15 million. EBITDA.
The asset manager said a 400 basis point increase in EBITDA margins would equate to a $7 rise in the share price and would be "thanks to public shareholders rather than the fact that Standard Mail acquired the company at a low price".
Bally’s suggested strategies in major cities
Of Chicago, Las Vegas and New York, the Windy City project is the most feasible and practical for Bally's, leading K&F to say the gaming company should seek a partner for the integrated resort. The asset manager believes the partnership can create value, noting that some analysts are concerned about Bally's ability to generate reasonable returns on invested capital in Chicago itself.
As for Las Vegas, where the Tropicana closed this morning and will be demolished later this year, K&F said it believes Bally's should sell the rights to the venue because it can't fund redevelopment there while taking care of Chicago and seeking New York Casino License.
"New York: Our strategy is simple - because we believe Bally's is unlikely to obtain one of the next three licenses in New York State, and seeking a license would be a huge administrative disruption and a huge financial effort, Bally's should immediately The withdrawal application "makes management changes to the core business," the asset manager noted.
Bally Online Operation Creativity
Bally's has built an extensive portfolio of domestic and international online gaming assets through a series of acquisitions, but missteps along the way have hindered the operator's ability to fully capitalize on these acquisitions.
K&F Growth Capital recommended that the company sell its non-core international digital assets, noting that the move could attract broad interest from potential buyers and help reduce debt. The asset manager said U.S. investors were not properly valuing Bally's international online gaming business, which could be a negative factor for the company's ability to raise capital.
K&F called Bally’s approach to iGaming and sports betting in the United States a “complete disaster” and implored the company to halt future investments in online sports betting and focus on bringing something unique to the internet casino space.
"We can't always put good money after bad money. Bally's should limit all online sports activities to a pure service business (similar to Boyd) and completely rethink all online casinos to focus all activities on brick-and-mortar The casino’s core customers. "
Read also:
- Blackjack Casino Advantage: How to Beat the Odds
- Football 101: What is relegation in football?
- Flutter Eyes will be listed on the New York Stock Exchange on January 29 and will be removed from the EUROSTOXX index
- The Boston Celtics and Milwaukee Bucks are the favorites for the NBA in-season tournament
Source: www.casino.org
