Takeover talks between MGM Resorts and People Inc may have reversed direction, with MGM reportedly considering a bid for the media company in the same week that Barry Diller’s People Inc rescinded an $18 billion offer to acquire the casino operator.
The Wall Street Journal first reported the potential reversal late Thursday, citing sources close to the matter. Diller had originally sought to acquire the 73% of MGM Resorts shares that People Inc does not already own, but withdrew the offer citing that the “ingredients” of the deal were not “coming together in the way we had hoped”.
From a market perspective, the developments have favoured People Inc, with its shares up 10% on the week. MGM, meanwhile, has seen its shares decline almost 15% during that span. The casino operator has lost a quarter of its value in the last month alone, currently trading at about $32.50.
Strategic rationale remains unclear
Diller began investing in MGM in 2020 and his current 27% stake is believed to carry around the same value as People’s $3 billion market capitalisation, according to the WSJ report. His interest in MGM centred on acquiring tangible assets in a business environment increasingly dominated by AI and technology, as a way to diversify holdings and guard against potential AI-related impacts to People’s media and publishing businesses.
However, it remains unclear what strategic value MGM would gain from acquiring People Inc, which publishes brands including People magazine and Food & Wine. The casino operator gave no indication of pursuing such an acquisition when MGM Chairman Paul Salem responded to Diller’s withdrawal, stating only that the company had a “clear path to increasing shareholder value” through existing strategies.
Despite withdrawing his offer, Diller expressed “total confidence” in MGM and said People Inc remained “open to and interested in the possibility of a strategic transaction with MGM Resorts”. Both People and MGM declined to comment to media outlets.
Analysts maintain bullish outlook on MGM
Market analysts remain optimistic about MGM’s prospects, with the general consensus being that difficulties related to borrowing costs and regulatory approvals likely killed the deal rather than fundamental issues with the casino operator itself.
Macquarie analyst Chad Beynon called MGM’s implied enterprise value of about $5.9 billion “a striking discount”, while Barry Jonas of Truist maintained a “Buy” rating with a price target of $55, well above its current trading price.
Industry implications
The potential reversal highlights the complex dynamics at play in cross-sector M&A activity, particularly as traditional media companies seek to diversify into tangible assets while casino operators navigate regulatory challenges and market volatility. The outcome of these discussions could set precedents for how gaming companies evaluate strategic partnerships with entities outside their core sector.
The situation also underscores the challenges facing large-scale gaming acquisitions in the current regulatory and financial environment, with borrowing costs and approval processes presenting significant hurdles even for well-capitalised bidders.
