Standard General Bally’s Bid Could Be Floor, Not Ceiling, Say Analysts

Bally’s (NYSE:BALY) buy in is trading higher Wednesday, following through on an epical Tuesday exchange sparked past a $38 per divvy up takeover extend from Standard General. Some analysts believe the play could represent an effort to place a floor below the previously 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 closed on Monday, Jan. 24, or nigh $2 billion. Standard General is a hedge fund controlled past Soo Kim, and owns to a greater extent than 20 percent of Bally’s shares, making it the largest investor. Kim is also a room member of the gaming company.

Even with that hefty premium, Bally’s stock up is ease disadvantageously battered, residing almost 52 percent at a lower place its 52-week high. That could follow a signalise Standard General is playing opportunistically with its takeover bid.

In a tone to clients today, Macquarie analyst Hashemite Kingdom of Jordan Bender says the $38 offer toll “could playact as a starting tip for Standard General, with the expectation for a potentiality takeaway terms to relocation higher.”

Bender reiterates a “buy” rating on Bally’s, with a $58 damage target, noting the operator’s land-based operations unaccompanied are worth $42 a portion out — a more than 10 percent premium to Standard General’s offering for the unit company.

How Gamesys Factors Into Equation

Last October, Bally’s wrapped the $2.7 1000000000 acquisition of the UK online gaming company Gamesys — the buyer’s biggest business deal to date.

While Bally’s offered cash in for Gamesys, in that respect was an alternative for the latter to invite shares inwards the buyer. When the business deal closed, Bally’s stockpile was trading over $50. Today, still with the welfare of the Standard General offer, the shares domiciliate below $37, indicating Gamesys investors that are now Bally’s shareholders may non live enthusiastic most the hedge in fund’s offer.

“Recall the 26 percent GYS insider ownership opted to make BALY equity in the deal, signaling their condemnation in the strategic rationale,” says Stifel analyst Jefferey Stantial. “At a $38/share takeaway toll for BALY, this implies legacy GYS shareholders are receiving ~$13/share in immediate payment per part of GYS antecedently owned, whereas the cash in offer up for GYS was exercise set at ~$26/share (at prior USD:GBP). We find it strong to conceive of legacy GYS shareholders allay inwards the stock testament regain these terms attractive, which is important, given the deal requires the majority of non-Standard General owned shares to ballot inward favor.”

On a related to note, it’s also notable that Richard Henry Lee Fenton is Bally’s chief executive director officer. He previously held that chore 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 conjure is clearly a positive for Bally’s stock. But it remains to follow seen if the accompany and other investors are warm up to the offer.

Stifel’s Stantial expresses “hesitancy” regarding the proposed damage and approval chance at such terms. He maintains a $70 damage target area on Bally’s.

“While it remains to be seen if they would think about nudging the price higher, if need be, we are positive degree even if the business deal at last falls through, as we expect, this should get some much-needed price find for a carry that has been overly punished, inward our view, inward the recent macro-driven selloff,” said the analyst.