Bally’s Agree To Merge With Standard General

Bally’s Corporation has announced plans to merge with Standard General’s affiliate, Queen Casino & Entertainment Inc. (QC&E).

The announcement saw Bally’s shares soaring 25% as investors recognized the potential synergies of this union. Under the terms of the deal, Bally’s shareholders will receive $18.25 per share, representing a 35% premium over the stock’s closing price on the eve of the announcement.

Shareholders have the option to receive the cash payment or maintain their stake in the merged entity, allowing them to participate in the anticipated upside. The transaction is expected to close in early 2025, subject to regulatory approvals.

Robeson Reeves, Bally’s CEO, underscored the strategic rationale behind the merger, stating, “The addition of four complementary properties through this merger to our existing 15 domestic casino properties will add further geographic and market diversity to our portfolio.” This expanded footprint promises to mitigate risk and unlock new opportunities across various regions.

Moreover, QC&E’s development pipeline, with projects recently completed or well underway, is poised to contribute to Bally’s revenue growth and EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent costs) enhancement as these initiatives reach fruition in 2025.

Reeves expressed enthusiasm about the merger, stating, “We look forward to bringing our ultimate vision to bear and to working closely with the Standard General team to execute on that vision.” This sentiment highlights the collaborative approach envisioned by Bally’s, leveraging the expertise and resources of both organizations to drive success.

The merger marks the culmination of Standard General’s persistent efforts to acquire a stake in Bally’s. The hedge fund had previously made overtures to acquire all outstanding shares in Bally’s, with its initial offer being rejected by the board in May 2022. Undeterred, Standard General sweetened the deal in March 2023, offering $15 per share for the regional casino company.

Bally’s retained Macquarie Capital to evaluate Standard General’s proposal, ultimately leading to the current merger agreement.

Standard General’s relationship with Bally’s dates back to 2016 when the hedge fund took an ownership stake in Twin River Worldwide Holdings, which later became Bally’s. Soohyung Kim, Standard General’s principal partner, secured a seat on the casino company’s board and eventually ascended to the role of chairman in 2019, just as the company went public.

This long-standing association provided Standard General with intimate knowledge of Bally’s operations and growth trajectory, informing its decision to pursue a deeper integration through the merger.

While Bally’s has always been a growth-oriented company, its expansion accelerated during the pandemic. In 2020, the company acquired three casinos from Eldorado Resorts – the Isle of Capri in Kansas City, the Lady Luck in Vicksburg, and the Eldorado Shreveport. These acquisitions were necessitated by Eldorado’s merger with Caesars Entertainment, which required the divestment of certain properties to appease regulators.

Building on this momentum, Bally’s acquired the iconic Bally’s brand name from Caesars, along with the Bally’s Atlantic City Casino. The company continued its acquisition spree the following year, amassing a portfolio of 15 casinos across 10 states.

Bally’s ambitions extended beyond traditional casino operations, as the company sought to capitalize on the growing online gaming and sports betting markets. In 2021, it acquired SportCaller, a free-to-play games provider, and Monkey Knife Fight, the third-largest daily fantasy sports company.

Additionally, Bally’s purchased Bet.Works for $125 million and Gamesys Group for $2.7 billion.

However, Bally’s interactive endeavours were not without their challenges. Last year, the company shuttered Monkey Knife Fight after failing to find a buyer for the struggling company. It also laid off 15% of its interactive staff, citing unsustainable employment levels exacerbated by the pandemic-driven hiring spree.

In a candid letter to employees, then-CEO Lee Fenton acknowledged the company’s over-hiring, stating, “The pandemic boosted our business, and we continued to hire at full pelt. I now can see that we may have over-hired in some areas, and I take full responsibility for that.”

Furthermore, Bally’s suspended its online sports betting service, Bally Bet, to retool its operations.

Despite these setbacks, Bally’s has remained resolute in its pursuit of growth. In the first quarter of 2024, the company’s earnings fell short of analysts’ expectations, exerting pressure on its share price. However, Bally’s reaffirmed its full-year 2024 guidance, with CEO Robeson Reeves expressing optimism about the company’s prospects.

“Our team is well-positioned to continue executing on our initiatives to drive growth across all our segments, including our international interactive business, North America Interactive, and our Casinos & Resorts segments,” Reeves stated. He further highlighted the company’s development pipeline, including the construction of a permanent casino resort in Chicago, for which a comprehensive financing plan has been announced.