MGM Resorts International has formed a dedicated board committee and enlisted consultants to assess media tycoon Barry Diller’s acquisition offer as talks with his People Inc. escalate, according to a report from The Wall Street Journal citing sources close to the matter.
Negotiations between the involved parties have picked up pace this month, though an agreement is not assured. MGM has not made a public statement regarding the proposal and believes the current bid does not reflect the company’s true value, as reported.
Diller proposed $48.30 per share on June 1 to purchase the stake of MGM not already owned by People Inc., which currently holds a 26.1% share in the hotel and casino company. This offer values MGM’s equity around $12.4 billion, estimating the company’s overall value at over $18 billion inclusive of debt.
Financial advisors, including those from JPMorgan Chase, are reportedly aiding Diller in securing funding for the potential deal. Upon public disclosure of the offer, Diller expressed confidence that People Inc. could fund the acquisition using its available cash along with “initial conversations” with prospective equity investors and other financing avenues.
“We believe that MGM’s assets and operations are not currently reaching their full potential in the public markets and rectifying this situation is unlikely while MGM remains structured as a public entity,” Diller remarked at the time.
Barry Diller
MGM’s stock has recently been trading just below the proposed acquisition price, suggesting investors believe a deal may occur.
The day following the proposal, MGM’s Chief Financial Officer, Jonathan Halkyard, stated at the NYU International Hospitality Investment Forum that the valuation of the company’s domestic operations is “at a significantly low multiple,” adding that this has been the case for an extended period.
Halkyard further noted that investors often “fail to adequately analyze the total value potential,” and described Diller’s view of MGM as “encouraging.”
He indicated that the diversity of the company’s operations complicates accurate valuation. MGM operates resorts in Las Vegas and internationally, generates revenue from table games, and is involved in online gambling activities, notably BetMGM.
Nonetheless, MGM and other gaming entities are under pressure from the rise of prediction-market platforms, which allow users to wager on a variety of outcomes from sports events to political races.
Simultaneously, Las Vegas has seen a decline in visitation from lower and middle-income families, increasingly depending on spending from a wealthier clientele. Casino firms have responded by providing discounts and other promotions designed to draw in customers to their establishments.
Diller’s proposal came shortly after Caesars Entertainment announced its agreement to be acquired by Tilman Fertitta, the owner of Golden Nugget. Fertitta Entertainment is set to acquire Caesars for $5.7 billion, while also assuming nearly $12 billion in Caesars’ debt, which totals the deal’s value at approximately $17.6 billion.