Barry Diller's People Inc has withdrawn its $18 billion proposal to acquire the 73% of shares in MGM Resorts that it does not already possess. This development, however, has sparked reports that MGM is now considering a bid for People Inc instead. The Wall Street Journal first reported this shift late Thursday, citing sources familiar with the situation.
Following the rescinded offer and the potential bidding change, People Inc has seen a 10% increase in its share value over the week, while MGM's stock has dropped nearly 15% during the same period. Diller, who began investing in MGM in 2020 and holds a 27% stake, indicates that this stake is roughly equivalent to People Inc's $3 billion market capitalization, according to the WSJ.
In a statement regarding the termination of the MGM takeover discussions, Diller expressed disappointment, stating that the "ingredients" for the deal were not "coming together in the way we had hoped." Nonetheless, he professed "total confidence" in MGM, adding that People Inc remains "open to and interested in the possibility of a strategic transaction with MGM Resorts."
People Inc did not provide comments to Reuters, and MGM did not respond to inquiries from iGB.
Diller had envisioned acquiring MGM's physical assets to diversify his business portfolio, especially in an era increasingly affected by AI and technology. The purchase would have aimed to buffer against potential impacts of technological advances on his media and publishing sectors.
Conversely, it remains uncertain what strategic benefits MGM would derive from acquiring People, a company known for publishing titles such as People magazine and Food & Wine. Recently, MGM has faced a significant stock decline, losing a quarter of its value in the last month alone.
MGM Chairman Paul Salem did not indicate any intent of pursuing an acquisition while addressing Diller's withdrawal from negotiations. In his statement on Wednesday, Salem claimed the company had a "clear path to increasing shareholder value" through its current strategies.
Analysts generally maintain an optimistic outlook for MGM. They believe the challenges around borrowing costs and the complexities of regulatory approvals likely hindered the deal rather than issues related directly to MGM. Macquarie analyst Chad Beynon noted MGM's implied enterprise value of approximately $5.9 billion as being "a striking discount," while Barry Jonas of Truist retained a "Buy" rating with a price target of $55, significantly above the current trading price of around $32.50.
