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Bally’s Corp. has committed over $150 million to purchase a majority stake of The Star Entertainment Group, a move that may put further strain on its finances as it prepares to bid for a downstate New York casino license. Star, an Australia-based gaming company, has found itself in dire straits due to compliance issues.
While Bally’s likely sees the investment as an opportunity to acquire assets at a discount with potential for future profits representing a multiple of the initial investment, there are questions about how much more capital might be necessary to produce those returns on a long-term basis.
For the Bally’s Corp’s business in the United States, a partial focus is on acquiring a license to develop and operate a casino in the Bronx, New York. Inspection of every aspect of the company’s dealings as that bidding process unfolds could include how Bally’s plans to meet all of its obligations given its ongoing development of a casino in Chicago and its turnaround project with Star.
Bally’s announces The Star Entertainment infusion
On April 7, the Bally’s Corp. formalized its agreement with The Star, committing $180 million to acquire a nearly 57% stake in the company. Prior to the intervention of Bally’s, The Star was on the verge of voluntary administration, which is a process in which a company appoints an independent administrator to investigate options for restructuring or shuttering operations according to Ian Verrender of ABC News.
In the release, Bally’s Chairman Soo Kim stated that, “this transaction provides Bally’s the opportunity to infuse The Star with what it needs to regain its position as Australia’s preeminent gaming destination and it allows The Star shareholders to share in what we confidently believe will be a brighter future together.”
Bally’s taking The Star private follows its own move from a publicly traded company to a private holding in 2024. While the release states that Bally’s has the funds to fulfill its commitment to The Star shareholders, there could be questions about whether it can fulfill those obligations and quickly build a new casino in New York City.
Bally’s ambitions include significant investment in the Bronx
Bally’s is also one of several gaming companies interested in one of as many as three downstate casino licenses the New York State Gaming Commission (NYSGC) intends to issue before the end of 2025. To that end, Bally’s has shared plans on a $2.5 billion development on Ferry Point.
While Bally’s already has development partners like the New York Yankees committed to assisting in the project if the NYSGC selects the bid, the bid will have to detail how the cooperative effort plans to finance the development of the casino in the application process. Kim has floated making shares in the casino available to Bronx residents as one possibility.
That proposal is reminiscent of Bally’s maneuvering in Chicago, where Bally’s also has attempted to offer shares in its future permanent casino as an attempt to fulfill a contractual obligation for minority ownership. The situation in Chicago for Bally’s could raise eyebrows with decision-makers in New York in light of the company’s new interest in The Star.
Chicago struggles could impede New York casino bid
Prior to Bally’s going private, doubts lingered about whether Bally’s would be able to fulfill its commitment to the future permanent casino in Chicago. Bally’s Chicago has been operating in a temporary location since September 2023 as construction of that facility is ongoing.
Bally’s was able to secure financing from a partnership with Gaming and Leisure Properties, Inc. However, Bally’s nonetheless still went to Chicago seeking a reduction in its property tax obligation on its temporary facility in January.
The new majority holding in The Star could bring up new concerns that echo former stakeholder dissent in the bid to take Bally’s private. A letter from K&F Growth Capital urging investors to vote against the ultimately successful takeover by Standard General expressed fears that operations in Chicago and ambitions in New York were overextending the company’s resources.
Bally’s insists that it has the capital to fulfill the initial investment in The Star, but the majority holding would put Bally’s on the hook for further costs necessary to complete the turnaround Kim mentioned. Additionally, if future returns from The Star do not live up to Kim’s expectations or the process takes longer than Bally’s expects, that could limit Bally’s ability to allocate resources to the casino in New York.
At this time, much remains hypothetical for Bally’s in New York as the selection of its bid is still contingent on many factors besides a financing plan. However, that element will be just as vital to success as any other.
