Two years after a failed attempt to acquire Bally’s Corporation, Standard General L.P. made a renewed bid on Monday to acquire the remaining stake of the casino giant.

Standard General, a New York-based hedge fund, made an offer to acquire the regional casino at $15 a share, a 41% premium to the March 8 closing price. The bid values Bally’s at approximately $684 million.

Founded by Bally’s Independent Chairman Soo Kim, Standard General owns about 23% of the Rhode Island-headquartered company.

The bid sent shares of Bally’s soaring 28% on higher-than-average volume. Still, Bally’s market capitalization is a sliver of the levels in January 2022 when Standard General made a takeover attempt that valued the company at $2 billion. The offer for $38 a share was ultimately rejected by the company’s Board of Directors.

“As a result of our long-term involvement with the Company and its predecessor, we have a detailed understanding of the company, its business and assets, which will enable us to move quickly to negotiate and execute mutually acceptable definitive transaction documentation,” Kim wrote in a letter to Bally’s Corporation and its Board.

Standard General L.P. is an SEC-registered investment adviser founded in 2007 by Kim, the managing partner and chief investment officer of the fund.

Financing for Chicago casino

Standard General is attempting to orchestrate a power play, as Bally’s looks to secure additional financing for a major casino project in Downtown Chicago.

Last month, Bally’s announced that the city approved the company’s revamped plans for a $1.7 billion downtown casino. The proposal for a new casino in the River West neighborhood of the city includes a 100-room hotel above the casino floor.

Bally’s has encountered a spate of logistical issues with the project located at a site formerly occupied by the Chicago Tribune‘s Freedom Center printing plant, including a plan that would allow Bally’s to conduct underwater construction involving the drilling of large-cylinder caissons into the ground. Caissons are watertight cylinders composed of concrete or steel that are used in areas with high water tables.

Bally’s re-submitted plans to the city after officials determined that underwater construction could cause potential damage to a series of underground municipal pipes.

Bally’s announced Thursday that the redesigned plans for its $1.7 billion downtown casino to be built in the River West neighborhood of Chicago were approved by the city, reports @AlTruda73.https://t.co/lnLUcTbc6W

— US Bets (@US_Bets) February 9, 2024

The proposed casino complex will be located on a 30-acre, one-million square-foot area near the city’s riverwalk. Bally’s has already received $300 million in financing from Oak Street Real Estate Capital, which purchased the Freedom Center in 2022 under a sale-leaseback agreement with the casino.

The corporation is in advanced negotiations to bridge the funding gap, Crain’s reported. Construction is tentatively scheduled to begin in July.

In the view of Macquarie analyst Chad Beynon, the casino project is a “polarizing issue” for investors. Nevertheless, he estimates the casino could generate $250 million in annual EBITDA at maturity.

Formation of special committee

Separately, Standard General noted that it expects Bally’s to form a special committee of independent directors to consider its proposal. Standard General will not move forward with the transaction unless it is approved by the special committee, the fund wrote in a 13-D filing with the U.S. Securities and Exchange (SEC) Commission.

The transaction will require approval from the majority of holders of shares not owned by Standard General or parties affiliated with Standard General, according to the proposal.

In addition, Standard General has held “extensive discussions,” with potential financing sources for the takeover, Kim wrote in the letter. Standard General does not anticipate encountering any issues in securing the financing, he added.

Soo Kim, the chairman of Bally’s and founding partner of its largest shareholder, New York hedge fund Standard General, is doubling down on the company behind Chicago’s casino.https://t.co/rNprs6fHHd

— Chicago Tribune (@chicagotribune) March 12, 2024

Multiple sources identified Apollo Global Management, a leading alternative asset manager, as a likely source of funding, Earnings + More reported.

Beyond Standard General, several institutional investors have equity in Bally’s, led by BlackRock Fund Advisors, which owned an 8.1% stake, as of last September. Among mutual funds, four separate Vanguard funds own a stake between 1-2%. The Vanguard Total Stock Market ETF owned a 1.90% stake, as of Oct. 31, 2023.

Online gambling trajectory

When it comes to online sports betting, Bally Bet has severely lagged behind the leaders in New York, the nation’s top market.

For the first two months of 2024, Bally’s ranks eighth among operators with gross gaming revenue (GGR) of $1.15 million. Bally Bet is within $150,000 of catching Resorts World for seventh.

In some respects, Bally Bet is trending upward in the Empire State.

When Bally’s reported a $9.7 million handle in February, the operator topped its previous record for the third straight month. But Bally’s is far from the stratosphere where market leaders FanDuel and DraftKings currently sit. Bally’s 2024 market share in terms of GGR is a shade under 0.5%.

The performance is likely not what Kim envisioned several years ago when he proposed a “3.0 version of sports betting” for viewers. The idea centered around the creation of an omni-channel platform that combined live sports, television, and sports betting.

Speaking exclusively with US Bets, Kim appeared bullish on certain microbets that would allow fans to wager on the distance of an Aaron Judge home run on a YES Network broadcast.

At the time, Kim predicted that the platform would create an entertainment experience that would resonate with viewers enough to “save television.”

The latest in the Diamond Sports Group saga suggests regional sports networks businesses are going to be around for a while.

RSNs will never be ~50% margin businesses again, but they can still be viable.https://t.co/qICcdPiXqk pic.twitter.com/kZL43Ta4Vm

— JohnWallStreet (@HowieLongShort) March 11, 2024

Fast-forward two years later, and Bally’s Sports is dealing with overarching debt issues after the nation’s largest owner of regional sports networks (RSNs) looks to emerge from bankruptcy proceedings. Formed in March 2021, the Bally’s Sports Regional Networks contain a litany of local cable sports networks, most notably MSG Network and YES in New York.

In January, Amazon announced that it would invest in Diamond Sports Group (DSG), as part of a broader restructuring agreement. DSG, the owner of 18 sports networks under the Bally’s Sports umbrella, filed for Ch. 11 bankruptcy proceedings last March in Texas.

Prior to its acquisition by Bally’s, DSG reported debt of $8.67 billion in late 2021.

Big news this morning that Amazon is acquiring a minority stake in Diamond Sports Group.

The regional sports network filed for bankruptcy last year, putting local media rights for 37 teams across the NBA, MLB, and NHL in jeopardy.

Now, customers can watch games on Amazon Prime. pic.twitter.com/959nnLRyCO

— Joe Pompliano (@JoePompliano) January 17, 2024

The view from Wall Street

One analyst, Truist Securities’ Barry Jonas, notes that Bally’s leverage remains high (at 6.8x 2024 estimates).

From an EBITDA perspective, Bally’s proposed bid of $38 a share two years ago (9.0x of Truist 2023 estimates) seems far more attractive than Monday’s offer around 7.5x of 2024 estimates. Bally’s prospects have changed meaningfully since Kim’s last bid, Jonas added, as the operator’s North American interactive division has not proved to be “formidable.”

Beynon, meanwhile, remains neutral on Bally’s. The company continues to own a “strong portfolio of assets,” compared to its regional peers, he emphasized. A potential land sale on the property of the Tropicana Las Vegas casino could net between $400 million to $650 million, an area under consideration for relocation by the Oakland A’s.

Together with @BIG_Architects and @HNTBCorp, we have unveiled the design for our new ballpark project in Las Vegas on the Tropicana site. BIG will serve as the design lead and HNTB as the sports/hospitality designer and architect of record.

Images by Negativ pic.twitter.com/mvpiCBXD54

— Oakland A's (@Athletics) March 5, 2024

On Tuesday morning, Bally’s jumped another 7% to a session high of $14.65 per share. Beynon reiterated a $12 price target, slightly below Jonas’ target of $14. Truist applied a blended multiple near the bottom of the traditional land-based sector’s 6x-10x EBITDAR range, as Bally’s continues to execute toward its long-term strategy.

Bally’s made its online casino debut last week in Rhode Island, when the Ocean State became the nation’s seventh state to go live with online gambling offerings. While Bally’s plans to offer 170 slot games at the outset, it will also tout live dealer games for blackjack and roulette.

Bally’s traded at a three-year high of $75 a share in March 2021.

Photo: Getty Images.

Better Collective’s Chris Altruda contributed to this story.