Media and technology giant IAC/Interactive Corp., which is controlled by billionaire and media mogul Barry Diller, spent more than $1 billion to purchase 59 million shares of MGM Resorts International – a 12% ownership stake.
Both IAC and MGM announced the stock transaction through statements and filings with the Securities and Exchange Commission Monday.
IAC acquired the MGM shares, traded on the New York Stock Exchange, in 34 transactions between June 9 and August 7, ranging from a low of $15.38 to a high of $21.92, according to the company’s 13D filing.
“What initially attracted us to MGM, besides its leadership in leisure, hospitality, and gaming, was an area that currently comprises a tiny portion of its revenue – online gaming,” Diller, who is chairman and senior executive of IAC, said in a statement.
IAC Chairman Barry Diller
“IAC’s foundational concept of seeking opportunities to build interactive businesses is our base rationale – there is a digital-first opportunity within MGM Resorts’ already impressive offline businesses, and with our experience, we hope we can strongly contribute to the growth of online gaming,” Diller said.
Shares in Las Vegas-based MGM jumped more than 20% on the news Monday on the New York Stock Exchange. The share price ended the day at $21.65, up $2.62, or 13.77%. More than 70 million shares of MGM shares were traded Monday, almost two-and-a-half times the average daily volume.
Diller, 78, founded the Fox Broadcasting Co. and USA Broadcasting. He is currently No. 168 on the Forbes 400 with a net worth of $3 billion.
In a statement, MGM Chairman Paul Salem said the company welcomed IAC as “a long-term strategic partner” and intend to invite the company to have a representative join the MGM board. He said IAC CEO Joey Levin and Diller, “bring vast experience in both entertainment and online commerce and we will take full advantage of their experience.”
Diller founded IAC in 1995. Diller is also chairman of online travel giant Expedia, which acquired its holding company, Liberty Expedia, in a $2.6 billion deal in 2019.
“IAC’s family of brands and digital expertise are a great complement to the direction MGM Resorts has been taking both in leveraging our digital assets to enhance our guests’ experience and building a leading iGaming and sports betting business in BetMGM,” Salem said.
In the statement, MGM said data-driven, digital and customer-centric innovations are a key principle of the company’s MGM 2020 plan announced last year.
“IAC’s expertise in growing and expanding brands online is a natural fit for our focus on enhancing the resort experience through curated and personalized offerings, as well as digital enhancements in sports betting and online gaming,” MGM Resorts CEO Bill Hornbuckle said in a statement. “We appreciate that they share our long-term strategic vision for growth and maximizing value for our shareholders. We welcome their collaboration and are excited at the possibilities it will bring.”
Diller said MGM Resorts’ businesses, along with IAC’s experience, could contribute to the growth of online gaming.
Levin, in a statement, called MGM a unique opportunity “to own a meaningful piece of a preeminent brand in a large category with immense potential to move online.” He said the company intends to be “a minority investor and a long-term strategic partner.”
Levin added IAC “would welcome the opportunity to contribute to MGM’s success in any way that MGM’s Board would look favorably on our involvement.”
Reaction
Deutsche Bank gaming analyst Carlo Santarelli told investors after the announcement the value of the partnership is from IAC’s history and expertise in the digital media environment.
“While unusual for IAC to acquire equity in the public markets, the IAC team believes it is taking a meaningful stake in an early stage online movement with a prominent brand within gaming,” Santarelli said. “IAC referred to the investment in MGM as ‘a once in a decade’ opportunity. Management of IAC, and presumably MGM and its board, believes IAC’s history of driving the conversion of off-line, and in this case, brick and mortar, to online, will be value-creating for the partnership. IAC is clearly, and stated as much in its investor letter, taking a long term view of the online opportunity within gaming.”
It’s unclear if IAC and/or Diller will have to be licensed by Nevada gaming regulators. Under state gaming law, an individual that acquires a more than 10% ownership stake in a gaming company must be licensed. The rules are different for “institutional investors.” Another factor could be the influence IAC has in the operations of MGM Resorts.
MGM has casinos in five other states – Maryland, Mississippi, Ohio, Michigan, and New Jersey. It’s unclear how regulators in those states will view the stock acquisition.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
