Bally’s investor wants company to reject buyout bid

The leaders of a California asset management fund have called for a special committee of Bally’s Corp. to reject a buyout bid from Standard General founder and Bally’s Chairman Soo Kim and return to its casino development roots.

Manhattan Beach-based K&F Growth Capital, which holds a stake in Bally’s, sent a letter critical of Standard General’s bid to take the company private and essentially said three major projects undertaken by Bally’s, including the redevelopment of the Tropicana in Las Vegas, are too much for the company to handle at one time.

“Moon-shot bets on huge, unfunded development projects, failed U.S. online execution, casino resort properties underperforming its regional peers, an overlevered balance sheet with little near-term prospects for de-levering and irresponsible capital allocation decisions have driven the stock and bonds to a point of disinterest from the investing community,” K&F managing partners Dan Fetters and Edward King said in a Tuesday letter to Bally’s board directors.

Fetters and King recommend that Bally’s partner with experienced casino developers to pursue the Tropicana project and its development of a Chicago casino and abandon pursuit of a downstate New York license.

The Tropicana closed Tuesday after nearly 67 years of operation and the hotel-casino is expected to be demolished to make way for a $1.5 billion, 33,000-seat Major League Baseball stadium for the relocating Oakland Athletics. Nine acres are earmarked for the stadium and the company has said it plans to build an adjoining resort on the remaining 26 acres of the Trop campus.

Representatives of Bally’s did not respond to an emailed request for comment about the proposal.

The K&F letter listed a six-step alternative to Kim’s proposal to buy remaining shares of Bally’s for $15 a share.

Details of K&F’s alternative plan:

— Reject Standard General’s acquisition proposal. “We recommend the Special Committee of the Board of Bally’s reject Standard General’s self-serving and undervalued acquisition proposal. It is counter to the best interests of all stakeholders, offering a fraction of the value otherwise attainable.”

— Refocus management on core operational discipline. “We can only surmise the distraction of Chicago, New York and Las Vegas has prevented senior management from optimizing core performance as Bally’s is the only major regional operator not to have increased margins relative to pre-Covid levels.”

— 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. “Bally’s should not, nor has the standalone capacity, to be in the business of ‘bet the company’ projects. Projects of the magnitude of Chicago, Las Vegas and New York require a team with extensive experience in major (north of $1 billion) project development, experience dealing with (and a database of) high-end destination customers, and a balance sheet with the capacity to fund the project and maintain the property.” The letter also said Las Vegas “creates a cloud of uncertainty for the foreseeable future as Bally’s has no ability to fund development while concurrently building Chicago and bidding on a New York license.”

— Focus U.S. interactive operations on casino products and eliminate further investment in sports product-user acquisition. “The strategy employed over the last three years has been an unmitigated disaster.”

— Institute a substantially more disciplined, return-focused merger and acquisition strategy.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on X.