Barry Diller’s attempt to acquire MGM Resorts International (NYSE: MGM), the casino operator in which his People Inc. (NASDAQ: PPLI) is the largest shareholder, is under investigation by a securities law firm.
New York-based Bleichmar Fonti & Auld LLP has announced that it is investigating the $48.30 per share takeover bid made by media mogul Barry Diller for MGM Resorts International, citing potential conflict of interest and violation of fiduciary obligations.
“Because Diller ‘stands on both sides’ of the proposed deal, and because other MGM fiduciaries could potentially receive benefits that other stockholders do not receive, these facts create a create conflicts of interest under Delaware law,” according to a statement issued by Bleichmar Fonti & Auld. “If MGM and Diller reach an agreement, they must comply with Delaware’s strict requirements for ‘cleansing’ these conflicts and ensuring the deal is fair to MGM’s stockholders.”
Prior to the acquisition offer, Diller and MGM had an agreement limiting his voting power under certain circumstances due to his position on MGM’s board. Diller, who holds over 26% of MGM’s shares, has expressed reluctance to support any takeover that is not his own.
Intense Examination of Diller’s MGM Takeover Bid
In addition to Bleichmar Fonti & Auld, there are other entities closely examining Diller’s bid for MGM Resorts International at $48.30 per share, valuing the company at $18 billion. While some view the offer as low, there is limited scope for other bidders to enter the scene.
Some investors of People Inc. are also cautious about Diller’s move. Yakira Capital, a shareholder of People, has raised concerns about the risk involved in the MGM takeover, especially when People Inc. shares are trading at a ‘negative valuation.’
“The timing is also particularly difficult to understand. Economic uncertainty remains elevated, consumer spending is slowing, and the long-term competitive landscape for online gaming continues to evolve,” according to the money manager. “At the same time, the market is signaling that MGM shareholders expect a higher price, meaning any successful acquisition would likely require an even greater premium.”
Yakira suggested that People should abandon the MGM takeover and sell its stake in MGM to repurchase its own shares, potentially increasing the overall value.
MGM has acknowledged receipt of Diller’s offer and established a special committee to assess the bid.
Comparison to Caesars Situation
Similar scrutiny is ongoing in the acquisition of Caesars Entertainment (NASDAQ: CZR) by Fertitta Entertainment, with a law firm investigating the $17.6 billion deal. The difference is that the board of Caesars has approved the offer, unlike MGM’s situation where no such approval has been given yet.