Barry Diller's People Inc. has put forth an offer to acquire MGM Resorts International, valuing the casino operator at over $18 billion. This proposal comes shortly after Tilman Fertitta's firm announced its acquisition of Caesars Entertainment, indicating a fresh wave of consolidation within the U.S. casino sector.
On Monday, People, previously known as IAC, revealed it has offered $48.30 per share in cash for the MGM shares it does not already own. This offer represents a premium of around 10.6% compared to MGM's closing stock price last Friday.
People currently holds a 26.1% stake in MGM Resorts, and if the deal goes through, it would control just over 50.1% of the casino operator's equity, leaving minority holdings for other investors.
MGM has acknowledged receipt of the proposal and stated that its board of directors, along with financial and legal advisors, will assess the offer before deciding on the next steps.
This bid comes amid a surge in merger and acquisition activities in the gaming industry. Just last week, billionaire Tilman Fertitta announced a $17.6 billion deal to purchase Caesars, leading analysts to speculate that more consolidations may be on the horizon.
Jefferies analyst David Katz noted, "Following Fertitta's announced acquisition of CZR last week, we believe this transaction could serve as a catalyst for increased deal activity across the casino sector."
Investor reactions to the proposal have been positive, with MGM shares rising over 14% on Monday, trading above the proposed offer price, while People’s shares saw a slight decline.
Diller's interest in MGM began during the COVID-19 pandemic when IAC started buying shares as casino stocks were hit hard by travel restrictions and closures.
The experienced media executive has consistently argued that MGM is significantly undervalued, despite owning some of the most recognizable gaming and hospitality properties globally.
In a statement, Diller expressed, "We began investing in MGM nearly six years ago because we believed it represented a rare kind of business: one with real-world assets that AI cannot easily replicate and exceptional digital growth opportunities. Our conviction has only strengthened over time."
In an April letter to shareholders, Diller referred to MGM stock as "wildly undervalued" and indicated that People would increasingly focus on its investment in the casino operator.
This investment has already yielded substantial returns for People, which reported $34 million in unrealized gains from its MGM stake in the first quarter, a stark contrast to a loss of approximately $324 million during the same period the previous year.
MGM stands as one of the largest gaming operators in the U.S., with flagship properties accounting for about 40% of the Las Vegas Strip. Over 87% of its U.S. casino and hotel portfolio is located in Las Vegas, featuring around 37,000 hotel rooms, 9,168 slot machines, and 723 gaming tables.
However, the operator has encountered challenges in recent quarters as visitor numbers to Las Vegas have softened. Growth from its Macau operations and digital business has somewhat alleviated this pressure.
One of MGM's most promising growth assets is BetMGM, its online betting and gaming joint venture, which has become a leading sportsbook operator in the U.S. Analysts increasingly view the digital gambling segment as a crucial driver of future growth for major gaming companies.
For Diller, whose business empire has historically revolved around media, publishing, internet, and travel brands, this acquisition would mark a significant expansion into the gaming and hospitality sectors. His past investments in travel include Expedia, which IAC acquired in 2002 before later spinning it off as an independent company.
The proposed acquisition is now pending review by MGM's board, which has yet to indicate whether it plans to enter negotiations or explore alternative options.