MGM Resorts International is staying silent even in front of Nevada regulators about a proposal by a company led by billionaire Barry Diller to acquire the casino giant.
MGM executives appeared before the Nevada Gaming Control Board on Wednesday as part of an agenda item on a continuous public offering. Chandler Pohl, vice president of and legal counsel for the casino operator, was asked by Board Chair Mike Dreitzer for any updates on the pending or potential transaction.
“I can say only what has been made publicly available and should more developments take place, it will become public as well,” Pohl said.
Diller’s People Inc., previously known as IAC, has made an $18 billion offer for the remainder of MGM’s shares. People Inc. currently owns 26.1% of the outstanding common stock of MGM, where Diller serves as a Board member.
People Inc., which trades on NASDAQ, has submitted a non-binding proposal to the MGM Board of Directors to acquire all outstanding shares that People Inc. does not already own for $48.30 per share in cash.
This proposal represents a premium of 24.1% to the volume-weighted average price of MGM common stock for the 30 trading days ending on May 29, a more than 30% premium to the stock’s volume-weighted average price for the 90 trading days ending on the same date, and a 10.6% premium to the most recent closing price, the company announced.
The Gaming Control Board recommended the Nevada Gaming Commission approve the continuous public offering for MGM. It could be used in the future for any refinancing or even a public offering, if something were beneficial to MGM, according to the company’s private legal counsel Sean McGuinness.
“It provides the flexibility to move quickly to hit the market appropriately, instead of having to go through the more lengthy process with the Board,” McGuinness said. “By the time you go through the process with the Board and Commission, the opportunity might have passed.”
Gaming Control Board member Chandeni Sendall said in the past, MGM has used the process for new debt, equity for general corporate purposes, and to retire old debt.
Sendall then asked Pohl about the financial health of the company, with the second-quarter earnings calls scheduled for July 29.
“The quarterly results will come out soon and everything seems to be in order as expected,” Pohl said. “We wait anxiously for those results ourselves.”
The Board also recommended approval of MGM’s application for an order of registration and transfer of membership interest for the CityCenter condo, casino, and hotel project on the Strip. McGuinness said the matter relates to an item on the December agenda to take out MGM’s CC Holdings Inc., because of plans to move intellectual property. Even after approval by the Commission, he said the transaction never closed.
“We didn’t do it, so we had to apply to bring MGM CC Holdings back into the order of registration and clean up and correct the percentage of ownership between Project CC and MGM CC Holdings,” McGuinness said. “We had it reflected as 50% and 50%, but it should have been 65.79% for Project CC. This goes back to when Infinity World was bought out of CityCenter Holdings. It was originally 50% Infinity World and 50% MGM.”
McGuinness said Infinity World, a subsidiary of Dubai World, the global investment conglomerate owned by the government of Dubai, had their capital contribution returned In 2021. That adjusted their interest that wasn’t correctly reflected in the December application.
“To me, the main issue that ownership that was presented to the Board was not reflected properly,” Dreitzer said. “In review of this situation, it was not done intentionally, but was an oversight. You (should) make sure this type of oversight doesn’t happen.”
McGuinness said a procedure has been put in place when there is a joint venture to review any changes of ownership and defined in applications.
Dubai World took a 50% stake in the $9 billion CityCenter development in November 2007, just prior to the Great Recession that devastated the real estate industry.
The project consisted of Aria Resort & Casino, then-named Mandarin Oriental hotel and condo tower (now Waldorf Astoria), Veer Towers condos, and the Vdara condo-hotel. The $400 million Harmon condo tower was later demolished due to construction flaws.
In 2009, Dubai World sued to protect its interests in the project, citing MGM’s management of the development and questioning its overall long-term health. After nearly landing in bankruptcy, the project struck an agreement with lenders to provide emergency financing and ultimately the project was completed.
In 2016, MGM Resorts and Infinity World sold off The Shops at Crystals to Simon Property Group for $1.1 billion. Mandarin Oriental was sold to Waldorf Astoria for $214 million in 2018.
The 2021 buyout was part of a two-step transaction, with MGM acquiring Dubai World’s 50% for more than $2 billion. The purchase price represented an implied valuation of $5.8 billion based on net debt of $1.5 billion.
The second step was the sale of assets to Blackstone Real Estate Investment Trust for $3.89 billion, while MGM leased back and continued to operate the properties. Blackstone leased Aria and Vdara to MGM for an initial annual rent of $215 million.
