People Owner Bids for MGM Resorts, Deal Valued at $18 Billion

Businessman and media mogul Barry Diller’s People Inc. submitted a bid to purchase MGM Resorts at an $18 billion valuation.

MGM owns a slew of eminent gaming properties and attractions, including famed Las Vegas resorts, an online sportsbook, and a global portfolio of luxury casinos. The deal would pay $48.30 per share in cash to all shareholders to assume control of the brand’s assets.

Diller already has a strong voice inside MGM Resorts as an active board member. He said he would remove himself from board deliberations regarding the deal.

MGM could be sold to People Inc.

News of the takeover bid comes the week after billionaire Tilman Fertitta agreed to purchase Caesars Entertainment, another global gaming giant, in a deal valued at $17.6 billion that included $5.7 billion in cash. 

People, which already owns 26.1 percent of MGM, offered about 10.6 percent per share more than MGM’s current share value. A completed sale would give his media company just over 50.1 percent ownership of the company and would keep minority ownership shares open for other investors.

“We began investing in MGM nearly six years ago because we believed it represented a rare kind of business: one with real world assets that AI cannot easily replicate or disintermediate and exceptional digital growth opportunities,” Diller said in a press release. “We continue to believe the market materially undervalues the power and durability of MGM’s assets,” he said. “We believe MGM’s management team is superb, and that there is a compelling opportunity to support MGM’s next phase of growth and help unlock its full value.” 

The submission of the bid did not come as a surprise. CNBC’s Andre Ross Sorkin previously reported that an offer was expected as soon as Monday.

Diller also told shareholders in a letter dated April 28 that People would increase its focus on its “wildly undervalued” MGM ownership. The company maintains nine casinos on the Vegas strip, which include live-dealer table games and slot machines and represent about 40 percent of the local casino market, as well as America’s third-largest online sportsbook, which holds about 14 percent market share.

A sale will be considered

In light of receiving People’s bid for majority ownership, MGM Resorts said it would meet to consider the offer before announcing a decision.

“The Company's Board of Directors, in consultation with its financial and legal advisors,f will carefully review and consider the proposal to determine the course of action that it believes is in the best interests of the Company and all of its shareholders,” the company said in a news release.

The Culinary Union — which represents approximately 25,000 MGM employees in Las Vegas — also released a statement emphasizing its commitment to local workers, regardless of a sale agreement.

“While this proposal is still in the early stages, Culinary Union contracts provide strong protections for workers through any potential ownership change,” union Secretary-Treasurer Ted Pappageorge wrote in a statement. “We've had a long-standing positive relationship with MGM Resorts and if this transaction moves forward, we expect that relationship to continue.”

MGM’s powerful name in the gaming industry hasn’t prevented it from a fate that recently befell other gaming and Las Vegas hospitality brands and tourism experienced a sharp decline. According to the Las Vegas Convention and Visitors Authority, hotel room occupancy was down 1.8 percent on the Strip and 3.6 percent downtown compared to this time a year ago. 

Harry Reid International Airport also saw 336,284 fewer passengers than it did last April, marking a 7.1% year-over-year decline. 

Despite the warning signs, Diller, like Fertitta, is willing to bet on Vegas’ pull and the power of the gaming company’s brand.