Bally To Spin Off Hotel-Casino Unit As Separate Company
CHICAGO (AP) _ Bally Manufacturing Corp. said late Thursday it will spin off its hotel- casino group, which accounts for nearly half of its revenue, as a separate publicly-held company but will retain up to a 15 percent stake in the business.
Bally stockholders will receive, tax-free, 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 Chicago-based company said in a statement.
Bally will retain all components of its 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 hotel-casino company, which does not yet have a name, 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, said spokesman William Peltier.
The hotel-casino business accounted for about half of Bally’s $1.73 billion in sales last year, with health and fitness and the gaming equipment divisions accounting for roughtly 43 percent.
″The planned spin-off is intended to enhance stockholder values by simplifying the structure of Bally through the creation of two separate companies and by permitting the separate management of each company to pursue specific business opportunities on an independent basis,″ Peltier said in the statement.
The arrangement should allow the stock price of each publicly-traded company to more accurately reflect Bally’s underlying value, the company said.
Bally’s stock closed up 12 1/2 cents at $22.75 Thursday in composite New York Stock Exchange trading.
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.
Bally had been expected for some time to pursue to some type of restructuring. The spin-off approach will add some appeal for investors, said Lee Isgur, an analyst with PaineWebber Inc. in New York.
″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.
″My personal feeling is that in the long run the operation we know as Bally, which includes the health clubs, will turn out to be a better investment,″ he said. ″It’s a better business than casinos.″
Bally, the creator of Pac-Man, Space Invaders, and other video-game hits, announced last month it was selling its pinball-machine and video-game manufacturing business on which the company was founded for about $8 million to rival WMS Industries Inc., parent of Williams Electronics Games.