Bally’s Corporation has been told by K&F Growth Capital, an asset management company with shares in the operator, that it must reject the “woefully undervalued proposal” by Standard General to acquire the company.
In addition, K&F has presented a six-step plan for the operator to undertake instead, including the “sale or structured separation” of its international interactive business Gamesys, which was acquired in 2021.
Last month, Bally’s largest shareholder Standard General submitted a second bid to acquire the company after its initial offer was rejected in 2022. Standard General’s Managing Partner is Soo Kim, who is also the Chair of Bally’s.
Bally’s has also formed a special committee to assess the latest offer from Standard General.
However, in an open letter to the operator’s board of directors, K&F’s Managing Partners and Co-CIOs Dan Fetters and Edward King have recommended that Bally’s rejects the Standard General offer as it is a “woefully undervalued proposal” that counters the best interest of all stakeholders.
K&F owns less than one per cent of Bally’s stock, while Fetters and King are also founding partners of Acies Investments with online gaming expert Chris Grove and former MGM Resorts International CEO Jim Murren.
“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,” the letter stated.
In addition, K&F has provided a six-step plan of direction for the company to go in instead, encouraging Bally’s to do the following:
- Reject Standard General’s acquisition proposal
- Refocus management on core operational discipline
- Monetize non-core international interactive operations and use the proceeds to de-lever
- Eliminate construction and operating risk in Chicago, Las Vegas and New York
- Focus US interactive operations on casino products and eliminate further investment in sports product/user acquisition
- Institute a substantially more disciplined, return-focused M&A strategy
Regarding Gamesys, K&F stated that there is “minimal overlap between the legacy international Gamesys business and the core US casino operations” and that “a sale or structured separation” of the international interactive business should be pursued as “the universe of potential acquirers is expansive”.
Within its letter, the company also told Bally’s to focus its efforts on igaming and “curtail all online sports activity”, referring to the acquisitions of SportCaller, Bet.Works and Monkey Knife Fight, as well as the partnership with Sinclair Broadcast Group.
K&F also told Bally’s to reevaluate projects in Chicago, Las Vegas and New York, including operating partnerships in Chicago and Las Vegas, while withdrawing its application for a downstate New York casino licence.
The firm noted: “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.
“We look forward to an opportunity to discuss in detail our proposed plan with Bally’s management and the Special Committee and offer our assistance to implement our proposed plan. We believe Bally’s and its stakeholders can benefit from our experience, an ‘owner’s’ perspective, and sound advice on strategy and capital allocation, which we have brought to numerous public companies in the past.
“K&F Growth Capital would not have made this investment if we did not believe in a bright future for Bally’s as a public company with an enviable portfolio of high-quality assets, a well-capitalized balance sheet and a talented, dedicated group of leaders and employees. We are confident that by acting as partners, Bally’s will grow stronger.”