Amended Voting Agreement Could Simplify Future Sale of MGM Resorts
The revised agreement with Barry Diller's People Inc. means the media conglomerate will support board-recommended change-of-control deals.
MGM Resorts International amended its voting agreement with Barry Diller's People Inc., potentially simplifying a future sale of the casino operator while highlighting the role of MGM China in any change-of-control scenario.
Under the new agreement, People Inc., which controls approximately 26% of MGM's shares, will pledge those shares "in accordance with the Board’s recommendation in connection with a change-of-control transaction."
This marks a shift from Diller's earlier stance, made after disclosing an $18-billion takeover bid for the casino behemoth, that he would oppose third-party bids.
CreditSights recently noted that MGM China faces potential "event risk" if control of its Las Vegas-based parent changes hands.
The research firm called takeover overhang risk "less acute," but said the revised voting agreement with Diller implies MGM Resorts could be open to a future sale.
"(In) the amended voting agreement release between People Inc. and MGM, MGM’s chairman noted it creates ‘a clear path to maximize value through share repurchases and a change of control (CoC) transaction, if applicable,’ which to us, reads as MGM leaving the door open to another potential acquirer, a possibility that could resurface especially if MGM’s stock price remains depressed," said CreditSights.
The U.S.-based parent owns 56% of MGM China, the operator of MGM Cotai and MGM Macau.
CreditSights said the Macau entity could be a source of attraction for a future MGM suitor.
MGM has made it clear it is not conducting talks regarding a transaction with Diller’s media consortium, nor has it stated it is in discussions with another prospective buyer.
Soon after Diller made his takeover overture for MGM, unconfirmed reports suggested he wanted to unload the company’s stake in MGM China as well as its interest in MGM Osaka.
While a possible sale of the Las Vegas gaming giant may introduce event risk for the Macau entity, no transaction is currently on the table.
If one does come to pass, it could result in a favorable outcome or more clarity for MGM China.
