June 1 (Reuters) – Media mogul Barry Diller’s People Inc said on Monday it has proposed to buy MGM Resorts, valuing the casino operator at more than $18 billion, marking the industry’s second takeover bid in a week as it grapples with slowing consumer demand.
Shares of U.S. casino operators have lagged the broader market this year as they also navigate high debt loads. Hospitality billionaire Tilman Fertitta’s firm announced the takeover of Caesars Entertainment in a $17.6 billion deal on May 28.
For Diller, who views MGM as undervalued, the increasing stake offers an opportunity to diversify beyond the core media business that includes publications such as its namesake magazine and Food & Wine.
People, which currently owns a 26.1% stake in the casino operator, has offered $48.30 a share in cash for the remaining shares, representing a premium of about 10.6% to MGM’s Friday close of $43.67.
The digital media company expects to own just over 50.1% of the company’s equity, with other investors holding minority interests, the company said on Monday.
MGM Resorts did not immediately respond to a Reuters request for comment on the offer.
“Following Fertitta’s announced acquisition of CZR last week, our view remains that the transaction could act as a catalyst for incremental deal activity across the (casino) group,” Jefferies analyst David Katz said.
The casino operator’s shares rose 11.5% in morning trading, above the implied offer premium as investors bet on the likelihood of a deal. Shares of People – renamed from IAC in April – rose nearly 2%.
DILLER’S BET ON MGM RESILIENCE
The media mogul has focused on the travel and leisure industry before. He had acquired Expedia in 2002, built it into a global travel giant under IAC and later spun it off. He remained closely associated with the travel company for years as chairman.
His interest in MGM dates back to the COVID-19 pandemic, with People, then IAC, accumulating a stake in the casino operator when its shares were battered by closures and travel restrictions.
“We began investing in MGM nearly six years ago because we believed it represented a rare kind of business: one with real world assets that AI cannot easily replicate or disintermediate and exceptional digital growth opportunities,” Diller said on Monday.
“That conviction has only strengthened over time.”
Diller told shareholders in an April 28 letter that People would sharpen its focus on its MGM stake, calling the stock “wildly undervalued,” a comment he reiterated on Monday.
People recorded $34 million in unrealized gains from its MGM investment in the March quarter, compared with a loss of about $324 million a year earlier.
The casino operator owns marquee properties that account for roughly 40% of the Las Vegas Strip. However, it has been struggling with sluggish footfalls in Las Vegas, and has relied on growth in its China assets, including Macau, and digital operations in recent quarters.
The company’s BetMGM venture has also emerged as one of the leading U.S. online sportsbooks, giving higher exposure to a digital gambling market that analysts have been bullish on.
(Reporting by Aatreyee Dasgupta, Nathan Gomes and Aishwarya Jain in Bengaluru; Editing by Leroy Leo)
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