Is Barry Diller’s MGM Resorts offer high enough?
The move underscores the mounting consolidation pressures in the casino sector, but analysts have doubts about the price.
US.- Just days after the announcement of Tilman Fertitta’s offer to buy Caesars Entertainment, Barry Diller’s People Inc. made an offer for another US casino giant. The film and media mogul’s company aims to buy MGM Resorts International through an offer that values the Las Vegas-based company at more than $18bn.
The move underscores the mounting consolidation pressures as US casino operators contend with slowing consumer demand and heavy debt burdens. Analysts such as David Katz at Jefferies suggested that Fertitta’s offer last week could act as a catalyst for incremental deal activity across the gaming sector.
But is People’s offer for MGM high enough? It currently holds a 26.1 per cent stake in MGM, which it began building during the pandemic when casino shares slumped. It’s offering $48.30 per share in cash for the remaining equity. That represents a premium of around 10.6 per cent on MGM’s prior close of $43.67. The bid would give People just over 50.1 per cent ownership, with other investors retaining minority positions.
Valuing MGM at over $18bn, the offer surpasses Fertitta’s $17.6bn valuation of Caesars Entertainment. However, MGM Resorts International is larger when measured by revenue, global footprint and market presence on the Las Vegas Strip, although Caesars maintains a larger US domestic footprint by total number of physical properties.
MGM controls marquee properties that account for roughly 40 per cent of the Las Vegas Strip, though visitor traffic has been sluggish, leading the operator to lean on its Macau holdings and digital ventures to offset weakness in Nevada. Its joint venture BetMGM with Entain has become one of the leading US online sportsbooks, giving the company a strong foothold in the fast‑growing market, but it now faces competition from prediction markets.
Diller, who founded the Fox Broadcasting Company with Rupert Murdoch, is chairman of IAC and Expedia Group, which he transformed into a global travel powerhouse. In an April 28 letter to shareholders, he himself said MGM stock was “wildly undervalued”.
For the quarter ended March 31, MGM reported record consolidated net revenue of $4.5bn, an increase of 4 per cent year-over-year, although consolidated adjusted EBITDA was down from $637m to $580m and net income was down from $149m to $125m.
What analysts are saying
Analysts at the investment bank Stifel have argued that People’s offer undervalues MGM. However, the firm suggested private equity groups may join forces with People rather than mount competing bids.
Seaport Research Partners agreed that the bid price looks low given MGM’s assets, but stressed that the proposal signals genuine intent and could push MGM to consider divestments, such as MGM China or Osaka, which could trigger further deal-making in the sector.
CBRE Equity Research is taking a constructive view, predicting the deal will happen at a slightly higher price. They also noted that a successful take-private could reshape MGM’s portfolio and spur asset sales.
