Standard General Bally’s Bid Could Be Floor, Not Ceiling, Say Analysts
Bally’s (NYSE:BALY) stock is trading higher Wednesday, next through and through on an larger-than-life Tuesday exchange sparked past a $38 per divvy up takeover proffer from Standard General. Some analysts trust the play could correspond an sweat to assign a base under the antecedently faltering shares.
At $38 a share, Standard General values the Rhode Island-based gambling casino manipulator at a 30 percent premium to where its shares shut on Monday, Jan. 24, or virtually $2 billion. Standard General is a dodge monetary fund controlled by Soo Kim, and owns more than 20 percent of Bally’s shares, making it the largest investor. Kim is also a board fellow member of the gaming company.
Even with that hefty premium, Bally’s stock is ease disadvantageously battered, residing almost 52 percent infra its 52-week high. That could follow a contract Standard General is acting opportunistically with its takeover bid.
In a remark to clients today, Macquarie psychoanalyst Jordan Bender says the $38 offering toll “could represent as a starting pointedness for Standard General, with the outlook for a potentiality takeout price to move higher.”
Bender reiterates a “buy” rating on Bally’s, with a $58 toll target, noting the operator’s land-based trading operations unaccompanied are worth $42 a share — a to a greater extent than 10 percent insurance premium to Standard General’s bid for the unit company.
How Gamesys Factors Into Equation
Last October, Bally’s wrapped the $2.7 1000000000 acquisition of the UK online gaming accompany Gamesys — the buyer’s biggest deal to date.
While Bally’s offered cash in for Gamesys, in that location was an option for the latter to receive shares inward the buyer. When the business deal closed, Bally’s inventory was trading o'er $50. Today, even out with the welfare of the Standard General offer, the shares domicile infra $37, indicating Gamesys investors that are at present Bally’s shareholders may not be enthusiastic near the elude fund’s offer.
“Recall the 26 percent GYS insider ownership opted to submit BALY equity inwards the deal, signaling their article of faith in the strategic rationale,” says Stifel analyst Jefferey Stantial. “At a $38/share takeout food damage for BALY, this implies legacy GYS shareholders are receiving ~$13/share inward hard cash per part of GYS antecedently owned, whereas the immediate payment tender for GYS was readiness at ~$26/share (at prior USD:GBP). We happen it severely to conceive of legacy GYS shareholders relieve inward the gunstock testament encounter these terms attractive, which is important, granted the sell requires the bulk of non-Standard General owned shares to voting in favor.”
On a related to note, it’s also notable that Rose Louise Hovick Fenton is Bally’s chief executive officer. He previously held that job at Gamesys. Like Standard General’s Kim, Fenton is also a Bally’s director.
Offer Is Positive, But Deal Might Not Happen
The Standard General call is clearly a prescribed for Bally’s stock. But it remains to follow seen if the fellowship and other investors are warm to the offer.
Stifel’s Stantial expresses “hesitancy” regarding the proposed toll and commendation probability at such terms. He maintains a $70 price aim on Bally’s.
“While it remains to follow seen if they would flirt with nudging the terms higher, if want be, we are prescribed fifty-fifty if the trade in the end falls through, as we expect, this should driving some much-needed toll breakthrough for a inventory that has been overly punished, inward our view, inwards the recent macro-driven selloff,” said the analyst.