MGM has received a takeover bid from Barry Diller’s People Incorporated, the rebranded IAC internet and media conglomerate, valuing the company at $18bn.
The approach arrived just days after restaurant and gaming tycoon Tilman Fertitta tabled a $17.6bn take-private offer for Caesars Entertainment at $31.00 per share.
Macquarie analyst and managing director Chad Beynon told NEXT.io that both companies are trading at historically low levels, which is attracting strategic investors.
Beynon said: “These stocks are trading at historical low levels. So, I think these investors, whether it’s IAC/People’s or Tilman Fertitta – they’re strategic operators, but I really just think they see value at these levels.”
He also highlighted the resilience of travel and experiences as a sector, noting that investors remain bullish on these areas for the coming years.
Beynon added that the lack of new iGaming states in the US has weighed on valuations in recent years, with growth expected once real money gaming penetration increases domestically and globally.
On the likelihood of each deal closing, Beynon argued the Caesars sale looks more certain, with most investors expecting Fertitta’s bid to get over the line before the go-shop period ends on 11 July.
The MGM offer is seen differently, with Beynon noting that MGM’s share price was already trading above the $48.30 asking price, suggesting the bid should be treated as a starting point for further negotiation rather than a final number.
People Incorporated has also yet to secure full financing, and the floated deal covers only 51% of the business, adding further uncertainty to the MGM side of the equation.
On the Caesars digital front, Fertitta’s previous sale of the Golden Nugget online arm to DraftKings has led analysts to speculate that Caesars’ online gaming operation could also be divested following any completed acquisition.
People Incorporated is a digital-first company with online travel and dating apps already in its portfolio, and Diller’s original investment thesis for MGM was built around the company’s potential as a global digital business, according to Beynon.
The most significant question surrounding the potential MGM deal concerns British joint venture partner Entain, with whom MGM operates BetMGM, and whether a Diller-controlled MGM would seek to acquire a greater stake.
Beynon said: “The big question is does this change the outlook to buying out the 50% stake of BetMGM or buying all of Entain? Most investors believe that for MGM to own all of Entain – the tricky thing is what’s going on with the UK right now with the tax scheme.”
Diller had previously supported MGM’s original £8.1bn acquisition offer for Entain, a bid the company rejected at the time and one that looks questionable in hindsight given Entain’s subsequent performance.
Beynon raised the possibility of BetMGM being spun out entirely, noting: “Would they spin out the [BetMGM] business? Would they IPO it? IAC historically has been very good about spinning out businesses from the parent business.”
