Share
Bally’s shareholder, K&F Growth Capital, sent an open letter to the Board of Directors of Bally’s Corp. criticizing Standard General’s undervalued acquisition offer.
The letter comes one month after Bally’s Chairman Soo Kim and Standard General made a bid to take the gambling company private at $15 per share. Standard General owns about 23% of Bally’s stock.
In their letter, Bally’s high-profile investors and K&F managing partners, Edward King and Dan Fetters, argue that Kim is underestimating the company and is urging members to reject the proposal. Instead, they offer an alternative strategy to strengthen Bally’s and maximize its value.
Bally’s owns 16 casinos across 10 states and offers retail sports betting with licenses to offer online sports betting in 18 states. The company revealed plans to build Chicago’s first casino and a resort to replace the historic Tropicana on the Las Vegas Strip.
The company is also in the race to win a New York City casino license.
Bally’s managing partners, Fetters and King present a six-step strategy plan
With solid regional US casinos in its portfolio, K&F Growth Capital suggests Bally’s should reject the recently proposed Standard General bid.
Fetters and King encourage Bally’s to refocus management on core operational discipline over expensive projects in Chicago, Las Vegas, and New York.
K&F says the Board has the opportunity to refocus and realign management (including new hires, if needed) to address margin deficiency across:
- Player targeting, visitation, engagement and loyalty
- Scope of casino operations
- Cost structure
K&F sees Chicago, Las Vegas, and New York ventures as distractions to Bally’s management. They say that spending on those projects decreases the company’s stock and market share price.
Fetters and King suggested Bally’s should remove the uncertainty of such project developments:
“As we believe it is highly unlikely Bally’s 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’s should immediately withdraw its application to refocus management on core operations.”
F&K also implies that Bally’s should try to sell off its non-core international digital assets and capitalize on those purchases.
Other plan suggestions include eliminating further investment in sports product/ user acquisition. The letter says the company should shift online casino efforts to strengthening the core land-based customer experience:
“Bally’s 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. Why not consider an interactive casino product that provides a highly differentiated experience (e.g., tournaments, social and community play) rather than a “me-too” app?”
The ball is in Bally’s management and the Special Committee’s court
Bally’s formed a special committee of independent directors to evaluate the preliminary non-binding acquisition proposal. The company also hired an investment bank and a law firm to assist.
Fetters and King remain confident that “by acting as partners,” Bally’s will grow stronger:
“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 (NYSE: BALY) 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.”
