MGM Amends Voting Pact With People Inc., Caps Stake at 29.9%

MGM Resorts International has amended its voting agreement with People Inc., the media company chaired by Barry Diller. The amendment, announced on Oct. 28, caps the combined MGM stake of People, Diller, and certain associated persons at 29.9%. It also requires the group to vote with MGM's board on any change-of-control transaction.

In return, MGM agreed not to take defensive measures against the group. The pact comes about five weeks after People withdrew its offer to take MGM private. MGM disclosed the terms in a filing with the U.S. Securities and Exchange Commission.

What the Amended MGM Voting Agreement Includes

The amendment updates an existing voting agreement between the two companies. It covers People, Diller, and certain associated persons. The agreement refers to this group as the Covered Entities. Subject to certain conditions, the Covered Entities must vote all of their MGM shares as the board recommends, including on any change-of-control transaction. They also agreed not to buy additional stock if doing so would lift their combined ownership above 29.9% of MGM's outstanding shares.

MGM, for its part, will not take action against the Covered Entities as long as they comply with the agreement.

The agreement does not require either side to pursue a transaction. MGM said none is contemplated.

How the People Inc. Bid to Take MGM Private Fell Through

On June 1, People first proposed buying the MGM shares it did not already own. The $48.30-per-share cash offer represented a 10.6% premium to MGM's previous close. The bid came days after Fertitta Entertainment agreed to buy Caesars Entertainment for $17.6 billion. Caesars shareholders approved the deal on Sept. 22.

A special committee of MGM's board negotiated with People for several months. Talks ended on Sept. 23, when People withdrew the proposal. Diller said People had decided "not to pursue taking the company private at this time."

People still holds about 66.8 million MGM shares, or roughly 26.5% of the company, making it MGM's largest shareholder.

What Comes Next for MGM as a Standalone Company

MGM Chairman Paul Salem said the amended agreement gives the board "a clear path to maximize value." He pointed to share repurchases and, if applicable, a change-of-control transaction. Salem added that any such steps would be consistent with the board's fiduciary duties.

At 26.5%, People can raise its stake by about 3.4 percentage points before reaching the cap. MGM announced the amendment the same day it reported third-quarter results.

For now, MGM will remain a standalone company. It operates nine resorts on the Las Vegas Strip, along with regional U.S. properties. The company is also developing an integrated resort in Osaka, Japan.