MGM Resorts International has confirmed this week that MGM Growth Properties (MGP) is to be acquired by VICI Properties. Under the terms of a definitive agreement VICI will redeem a majority of MGP operating partnership units held by MGM Resorts worth $43 per unit, or circa $4.4bn in cash.
VICI will also acquire 100% of the outstanding class A shares of MGP in a stock-for-stock transaction.
MGM Resorts CEO and President Bill Hornbuckle explained: “In 2016 we started on our journey to become asset light and this announcement, together with our recently announced Springfield and CityCenter transactions, reflects the culmination of those efforts and a major step forward in simplifying our corporate structure.
“As a result of these actions, we are well positioned and remain focused on pursuing growth opportunities in our core business, with significant financial flexibility to continue to deploy capital to maximize shareholder value.”
The transaction values MGP at $17.2bn, inclusive of VICI’s assumption of approximately $5.7bn of pro rata debt. Adjusted for the recently announced MGM Springfield transaction, the implied 17.5x pro rata EBITDA multiple ranks among the strongest for a gaming real estate transaction to date and is a testament, said MGM, to the quality of its real estate assets and strength as a tenant.
Since the company formed MGP in a milestone transaction in 2016, both have executed multiple transactions providing for significant cash proceeds that have been used to strengthen its balance sheet, return capital to shareholders and fund substantial investments in significant growth opportunities.
Said the firm: “Among these investments is the formation of BetMGM, which has now solidified its position as a leader in the igaming and sports betting market in the US. These efforts also favorably positioned the company to weather the unprecedented crisis created by the COVID-19 pandemic and allowed the company to emerge in a position of strength as the economy continues to rebound.”
After giving effect to the $4.4bn in cash proceeds from this transaction, as well as the Springfield and CityCenter transactions, the company expects to have $11.6bn of domestic operations liquidity available to enable execution of its goals of becoming the premier gaming entertainment company, returning value to shareholders and solidifying its balance sheet.
Paul Salem, Chairman of the Board of MGP, noted: “The partnership with MGP over the past five years has provided significant value to MGM Resorts as well as MGP’s other shareholders. We are thankful to the MGP management team for all of their efforts to develop MGP into a premier gaming REIT, which is evidenced by the 15.9% premium offered by VICI in this transaction, representing a 149% increase to MGP’s valuation since IPO. We look forward to our new long-term partnership with the great team at VICI.”
As part of the transaction, the existing master lease will be amended and restated and will provide for an initial term of 25 years, with three 10-year renewals, and an initial annual rent of $860m, inclusive of the pending MGM Springfield transaction.
This lease will be guaranteed by the company and provide it with significant flexibility to manage its operations across the portfolio of properties covered by the lease.
Moreover, MGM Resorts will own an approximate 1% stake in the VICI operating partnership, worth approximately $370m. The transaction is expected to close in the first half of 2022, subject to customary closing conditions, regulatory approvals and approval by VICI stockholders.