The day after Caesars Entertainment shareholders gave the green light to a $17.6bn takeover, MGM Resorts International’s potential acquisition by People Inc. came off the rails.
People Inc.’s billionaire chairman Barry Diller said in a statement that the company withdrew its proposal to purchase all public shares of the casino giant because the pieces of the puzzle did not line up as they had hoped.
“There are lots of ingredients that go into a proposal of this kind on its way to completion,” Diller said. “We didn’t feel the mix was coming together in the way we had hoped and have decided not to pursue taking the company private at this time.”
MGM’s stock price fell 14%, from $38.90 on Wednesday morning to $33.50 on Thursday afternoon after the news.
Diller remains interested in buying out MGM
People Inc. already owns approximately 27% of MGM Resorts via its holding of 66.8 million shares of the publicly traded company.
Diller added that his firm’s belief in the future of the Las Vegas company remains “undimmed” and that People Inc. remains “open to and interested in” the possibility of a strategic transaction with MGM Resorts in the future. He suggested that the parties will consider a range of alternative options.
In a separate statement, MGM Resorts International Chairman Paul Salem said that the board of directors is excited to continue to lead the operator as a standalone company.
“Our leading position in Las Vegas, our best-in-class regional properties, and BetMGM’s continued momentum highlight the value we bring to our shareholders,” added Salem. “In addition, our international portfolio of MGM China and the significant opportunity ahead with MGM Osaka support a clear path to increasing shareholder value.”
Report suggests MGM could buy People Inc. instead
The day after the statements from the two companies, an unexpected twist emerged when the Wall Street Journal reported that MGM might now be considering a bid to purchase People Inc.
Unnamed sources suggested that if it decides to go ahead with that idea, MGM Resorts could make a formal proposal in the coming days. The outlet noted that People Inc.’s approximately 27% stake in MGM Resorts equates to almost the same value as Diller’s company’s entire market capitalization.
What would People Inc. acquisition of MGM have looked like?
Diller’s People Inc. submitted an offer on June 1 to buy all the shares of MGM Resorts that it does not already own. The deal would have valued the casino giant and BetMGM co-owner at more than $18bn.
The owner of media properties including People magazine said at the time that it expected to take control of MGM Resorts with 50.1% of the equity of the company, with other investors holding minority interests. Diller said he would have kept key MGM leaders like CEO Bill Hornbuckle in place post-takeover.
MGM Resorts runs numerous properties on the Vegas strip, such as the Bellagio and the MGM Grand, as well as various casinos in other U.S. states. It also has a 50% stake in BetMGM alongside British company Entain. Diller said in June that he believes the market “materially undervalues the power and durability of MGM’s assets” and that taking the company private would unlock greater growth potential.
Hornbuckle said on an earnings call in late July that the MGM board had formed a special committee composed of independent directors to review the proposed transaction and that he was confident the board would “pursue the course of action that’s in the best interest of the company and our shareholders.”
Diller thanked the committee and the MGM board for “giving us the time and consideration during the process.”
