Shares of MGM Resorts International (NYSE: MGM) saw a significant drop in after-hours trading on Wednesday after People Inc. (NASDAQ: PPLI), led by Barry Diller, decided to pull back its $18 billion offer to take the company private, which was initially proposed on June 1.
The announcement, first reported by The Wall Street Journal, coincided with Diller’s and other MGM board members’ visit to Las Vegas for an undisclosed special meeting. People Inc., as a 26.1% stakeholder in MGM, proposed $48.30 per share for the acquisition of the Bellagio operator. Diller cited complexities in the deal as the reason for abandoning the takeover bid.
“There are lots of ingredients that go into a proposal of this kind on its way to completion,” Diller told the financial news publication. “We didn’t feel the mix was coming together in the way we had hoped and have decided not to pursue taking the company (MGM) private at this time.”
Currently, MGM’s shares are down by 8.11% in after-hours trading, hovering around $34.80. A closure at this level would mark the lowest in six months.
Uncertainties Surrounding Diller’s MGM Offer
Following the acquisition offer on June 1, MGM’s shares initially rose amidst speculation that Diller’s proposal was undervalued and could potentially be increased or outbid by another party. However, neither scenario materialized.
Despite expectations of a potential raise in the offer from Diller, no such action was taken, leading to a decline in MGM’s stock price over the past month. The stock fell by nearly 14%, closing at $37.85, significantly below Diller’s $48.30 per share bid.
Typically, when markets are confident about the completion of a takeover, the target company’s shares tend to remain close to the offer price. This was evident in the case of Caesars Entertainment (NASDAQ: CZR), which traded near the $31 per share offer from Tilman Fertitta for an extended period.
Market signals today indicated a certain level of doubt, with elevated volume observed in some MGM October put options between the $34 to $38 strikes. Puts are often used by traders for downside protection or bearish bets.
Diller’s Continued Interest in a Deal with MGM
The future of Diller’s relationship with MGM remains uncertain, but some People investors may see his decision to withdraw the takeover offer positively.
While Diller did not specify People’s stake in MGM, he expressed openness to exploring strategic transactions with the gaming company in the future.
The form and potential outcome of any future deal are unknown, with MGM’s stance on such possibilities yet to be clarified.