Media tycoon Barry Diller’s People Inc. has extended an offer to purchase MGM Resorts International, valuing the casino company at over $18 billion. This move comes shortly after Tilman Fertitta’s group announced a deal to acquire Caesars Entertainment, hinting at a trend of consolidation within the U.S. casino market.
Formerly known as IAC, People disclosed on Monday that it has proposed a cash offer of $48.30 per share for the MGM stock it does not presently own. This bid reflects a premium of approximately 10.6% over MGM’s closing price as of last Friday.
The firm holds a 26.1% share in MGM Resorts and indicated that this transaction would lead to People owning over 50.1% of the casino operator’s equity, leaving other stakeholders with minority interests.
MGM confirmed the receipt of the offer, stating that its board of directors, along with financial and legal consultants, would assess the proposal before deciding on the next course of action.
This bid emerges amid increasing merger and acquisition activity in the gaming industry. Recently, hospitality mogul Tilman Fertitta revealed a $17.6 billion agreement to take over Caesars, igniting speculation that further consolidation might transpire.
“Following Fertitta’s announced acquisition of CZR last week, we believe this deal could potentially serve as a catalyst for additional activity within the casino sector,” remarked Jefferies analyst David Katz.
The market reacted positively to the news, with MGM shares rising over 14% on Monday, trading above the offered price, while People’s shares saw a slight decline.
A Strategic Investment in MGM
Diller’s interest in MGM has roots dating back to the COVID-19 crisis, during which IAC began acquiring shares in the company as casino stocks faced downturns due to travel restrictions and closures.
The seasoned media executive has consistently claimed that MGM is significantly undervalued, given its ownership of several premier gaming and hospitality brands globally.
“Our investment in MGM started nearly six years ago because we believed it represented a unique business model: one that features real-world assets that AI cannot easily replicate or replace, as well as outstanding digital growth prospects,” Diller asserted in a statement. “Our belief has only strengthened since then.”
In a letter to shareholders in April, Diller labeled MGM stock as “wildly undervalued” and indicated that People would aim to deepen its investment in the casino entity.
The investment has already produced considerable returns for the company, reporting $34 million in unrealized gains from its MGM holdings in the first quarter, starkly contrasting a loss of around $324 million during the same timeframe last year.
Focus on Las Vegas, Macau, and BetMGM
MGM ranks as one of the largest gaming operators in the U.S., with flagship venues that comprise about 40% of the Las Vegas Strip. More than 87% of its U.S. casino and hotel properties are located in Las Vegas, encompassing approximately 37,000 hotel rooms, 9,168 slot machines, and 723 gaming tables.
However, the company has encountered difficulties in recent quarters due to weakening visitation rates in Las Vegas. Growth from its Macau operations and digital business has partially alleviated some of this pressure.
One of MGM’s most valuable growth drivers is BetMGM, its online betting and gaming partnership, which has become a leading player in the U.S. sportsbook market. Analysts increasingly emphasize the digital gambling sector as a vital component for future expansion among major gaming firms.
For Diller, whose business empire has historically revolved around media, publishing, internet, and travel brands, this acquisition would signify a substantial foray into the gaming and hospitality sector. His past investments in travel included Expedia, which IAC procured in 2002 before subsequently spinning it off as an independent entity.
The proposed deal is now pending evaluation by MGM’s board, which has yet to indicate whether it will initiate negotiations or explore alternative avenues.