In a surprising shift in the ongoing corporate landscape, MGM Resorts is reportedly considering a takeover bid for People Inc., following the company's decision to withdraw an $18 billion offer to acquire a majority share of MGM. This revelation was initially reported by The Wall Street Journal late on Thursday, citing sources familiar with the developing situation.
People Inc. has experienced a surge of 10% in its share prices this week amid the news of the rescinded offer, while MGM has faced a nearly 15% decline in its stock value during the same period.
Barry Diller, who began investing in MGM in 2020, holds a 27% stake. This stake is thought to have a value comparable to People Inc.'s $3 billion market capitalization. Upon announcing the end of negotiations regarding the MGM acquisition, Diller remarked that the necessary "ingredients" for the deal were not "coming together in the way we had hoped". Despite this setback, he expressed "total confidence" in MGM and stated that People Inc. remains "open to and interested in the possibility of a strategic transaction with MGM Resorts".
MGM and People Inc. have not provided comments following these developments; Reuters reached out to People, and MGM did not respond to iGB’s inquiries.
Diller's interest in MGM stemmed from the tangible assets held by the casino operator amidst a rapidly evolving technological landscape, including the rise of AI and its implications for media and publishing businesses. A potential acquisition would allow People Inc. to diversify its portfolio better.
Conversely, the strategic benefit of MGM acquiring People Inc., which publishes various notable brands, remains uncertain. MGM’s shares have seen a quarter of their value evaporate over the past month.
Following Diller’s withdrawal from talks, MGM Chairman Paul Salem did not indicate any plans to pursue a purchase of People Inc. Instead, he affirmed that the company has a "clear path to increasing shareholder value" through its current strategies.
Despite the recent turmoil, analysts maintain an optimistic outlook on MGM. There is a general belief that high borrowing costs and regulatory hurdles were the main obstacles that derailed the deal, rather than any issues inherent to MGM itself. Macquarie analyst Chad Beynon pointed out that MGM's implied enterprise value of around $5.9 billion is significantly undervalued. Similarly, Barry Jonas of Truist holds a "Buy" rating on MGM, with a price target of $55, well above its current price of approximately $32.50.
