In a significant move within the gaming industry, Barry Diller’s People Incorporated has put forth a proposal to take MGM Resorts International private. This comes shortly after Fertitta Entertainment's agreement to acquire Caesars Entertainment, highlighting a wave of major transactions among leading U.S. casino operators.
The proposed buyout is valued at around $18 billion, offering $48.30 per share for the MGM stock that People Incorporated does not already own. This offer represents a 10.6% premium over MGM’s latest closing price and a 24.1% premium compared to the stock's 30-day volume-weighted average price.
People Incorporated, previously known as IAC, currently holds 66.8 million shares in MGM, accounting for a 26.1% ownership stake, making it the largest shareholder in the company.
In a letter addressed to MGM's board, Diller expressed concerns that the company is not fully capitalizing on its assets and potential in the public market. He believes that the current public company structure makes it challenging to rectify this situation.
The proposal indicates that People Incorporated aims to acquire just over 50.1% of MGM’s equity after the deal closes, effectively gaining control of the company. Other investors, including existing MGM shareholders, would retain minority stakes.
Diller, who is also a board member at MGM, stated he would abstain from any board discussions regarding this proposal. Should the deal proceed, it is expected that MGM's CEO Bill Hornbuckle and the current management team will remain in their roles.
People Incorporated plans to finance the acquisition through a mix of cash, debt, and equity commitments, although the offer is non-binding and will require further negotiations and regulatory approvals.
MGM has acknowledged the proposal, stating it will thoroughly evaluate the offer to determine the best course of action for the company and its shareholders.
Additionally, the proposal includes MGM's stake in BetMGM, its joint venture with Entain focused on online sports betting and iGaming.
Alan Feldman, a former MGM executive and current director at the International Gaming Institute, remarked that MGM stock has been undervalued for an extended period. He noted the company has consistently improved its financial standing and operational efficiency. Feldman expressed surprise that it took this long for a proposal like this to surface.
He also pointed out that while Wall Street often views gaming stocks as volatile, the industry has shown substantial growth over the decades.