What happened
Shares of Bally's (BALY 3.57%), which operates casinos and online betting properties, rose sharply on the morning of Jan. 25, gaining as much as 25.5% at one point. Bally's management hasn't commented yet, but the big news was a takeover offer from a private equity shop that was reported to the Securities and Exchange Commission (SEC) this morning.
So what
Standard General filed a report with the SEC that highlighted its existing 21% ownership stake in Bally's. And it outlined an offer to buy the rest of the company's shares for $38 per share. Standard General isn't expecting a quick response, given that Bally's board will have to form a special committee to mull over the deal. Still, given Standard General's already large stake and involvement in the company, it seems like a good suitor.
Image source: Getty Images.
As is usual when a takeover offer comes up, investors bid the stock of the target higher. That said, even after the huge gains today, the stock is still a few dollars below the offer price. This is normal, too, given that there's a very real chance that an agreement can't be worked out. What's interesting here is that the $38 per share offer is still materially below the over $70 per share the stock was fetching roughly a year ago. In other words, it looks like Standard General is trying to pick up Bally's at what it considers a bargain price.
Now what
It is very difficult to handicap merger and acquisition news because so many things can go wrong. And, as it stands, Standard General's offer is still very new, given that Bally's got the offer only this morning. Moreover, with the stock down so much from recent highs, it wouldn't be shocking to see Bally's board balk at the suggested price. So while it is clear that Bally's is "in play," it is far from clear where this drama is heading right now. Investors should tread with caution unless they have very strong convictions about a specific outcome.
