Bally Restructuring Continues With Plans to Spin Off Hotel-Casino Group
CHICAGO (AP) _ Bally Manufacturing Corp., which last month disclosed the sale of its pinball-machine and video-game businesses, is taking an even bigger restructuring step by spinning off its hotel-casino group to its shareholders.
Bally announced the planned restructuring late Thursday and said it planned to maintain a 15 percent stake in the hotel-casino business, which accounted for about half its $1.73 billion in sales last year.
The move is intended to boost Bally’s stock price by creating two separate companies and ″by permitting the separate management of each company to pursue specific business opportunities on an independent basis,″ Bally spokesman William Peltier said in a statement.
Bally’s stock closed up 12 1/2 cents at $22.75 Thursday in composite New York Stock Exchange trading. The restructuring was announced after the market closed.
Bally’s stockholders will receive as a tax-free dividend one share of common stock in the hotel-casino business for each share of Bally Manufacturing they own on the effective date of the spin-off.
The company, the creator of Pac-Man, Space Invaders, and other video-game hits, announced last month it was selling its pinball-video manufacturing business on which the company was founded for about $8 million to rival WMS Industries Inc., parent of Williams Electronics Games.
Bally will retain all of its other leisure and manufacturing businesses, which consist of Bally’s Health & Tennis Corp., a chain of 250 fitness centers; the Aladdin’s Castle chain of more than 300 video arcades; the Scientific Games division, which manufactures lottery equipment; Life Fitness Inc., a maker of exercise equipment; and a slot-machine manufacturing division.
The arrangement should allow the stock price of each publicly-traded company to more accurately reflect Bally’s underlying value, the company said in a statement.
Bally’s health and fitness operations and the gaming equipment divisions accounted for roughly 43 percent of the company’s revenue last year.
Bally indicated it expected each of the separate companies to post more than $1 billion in revenue this year.
Lee Isgur, an analyst with PaineWebber Inc. in New York, said the company had been expected for some time to pursue some type of restructuring.
″You could have the value of the two asset groups appreciate significantly from where they are today,″ Isgur said. ″Diverse groups of investors can focus on the group that most attracts them.″
Isgur said he began recommending Bally’s stock last spring, when it was trading around $16.
Wall Street has regarded Bally as ripe for a restructuring due to a relatively weak stock price stemming from an erratic performance in several ventures, such as its video game business.
Bally made big profits from the business during the video game craze of the late 1970s and early 1980s, but earnings tumbled when the games’ popularity declined. Bally wrote off much of the video game business in 1984 after it lost more than $100 million.
Bally fended off a takeover overture from real estate developer Donald Trump in 1987, paying a premium to buy Trump’s 9.9 percent stake in the company.
The hotel-casino company will operate two Atlantic City casino hotels, Bally’s Park Place and Bally’s Grand; and two casino hotels in Nevada, Bally’s Las Vegas and Bally’s Reno.
Consumation of the spin-off will require approval from New Jersey and Nevada authorities and the Internal Revenue Service, according to Bally, which also plans to seek stockholder approval.