MGM forms special committee as takeover talks with Barry Diller intensify, according to WSJ

MGM Resorts International has established a special board committee and appointed advisers to evaluate media mogul Barry Diller’s takeover proposal as negotiations with his People Inc. intensify, according to The Wall Street Journal, which cited people familiar with the matter.

Discussions between the parties accelerated this month, although there is no guarantee that an agreement will be reached. MGM has not publicly responded to the proposal and believes the current offer undervalues the company, according to the report.

Diller offered $48.30 per share on June 1 to acquire the portion of MGM not already held by People Inc., which owns 26.1% of the hotel and casino operator. The proposal values MGM’s equity at about $12.4 billion and the company at more than $18 billion when debt is included.

Bankers, including advisers at JPMorgan Chase, are reportedly assisting Diller in arranging financing for the potential transaction. When the offer became public, Diller said he was confident that People Inc. could finance the acquisition using its existing cash and “preliminary conversations” with potential equity investors and other financing sources.

“We believe that MGM’s assets and businesses are not currently realizing their full potential in the public markets and that it will be difficult to correct this situation in MGM’s current form as a public company,” Diller said at the time.

Barry Diller

MGM shares have recently traded slightly below the proposed acquisition price, indicating that investors see the possibility of a transaction being completed.

The day after the offer, MGM Chief Financial Officer Jonathan Halkyard said at the NYU International Hospitality Investment Forum that the valuation of the company’s domestic operations was “at a very low multiple,” adding that this has “been the case for quite a while.”

Halkyard also said investors sometimes “just aren’t doing the work to value the sum of the parts,” and described Diller’s assessment of MGM as “gratifying.”

He suggested that the company’s range of businesses made its value more difficult to assess. MGM’s operations include resorts in Las Vegas and international markets, table game revenue, and online betting activities, including BetMGM.

However, MGM and other casino operators are also facing pressure from the growth of prediction-market platforms, which allow consumers to wager on outcomes ranging from sporting events to politics.

Concurrently, Las Vegas has attracted fewer lower- and middle-income families and has become increasingly reliant on spending by a smaller group of affluent visitors. Casino companies have responded by offering discounts and other incentives intended to attract customers to their properties.

Diller’s approach came days after Caesars Entertainment agreed in late May to be acquired by Golden Nugget owner Tilman Fertitta. Fertitta Entertainment is acquiring Caesars for $5.7 billion and taking on close to $12 billion in debt from Caesars, putting the total value of the deal at about $17.6 billion.