Key Takeaways
- MGM Resorts International (MGM) is reportedly considering a takeover bid for Barry Diller’s People Incorporated (PPLI), just one day after Diller withdrew an $18 billion proposal to take the casino giant private.
- The potential counter-offer by MGM Resorts (MGM) could materialize within days, aiming to resolve a complex ownership structure where People Inc. (PPLI) currently holds a 27% stake in the casino operator.
- Shares of People Inc. (PPLI) surged 8.5% in after-hours trading on the news, while MGM Resorts (MGM) shares stabilized after falling 11% during the regular session following the collapse of the initial go-private deal.
- Analysts suggest the deal would allow MGM Resorts (MGM) to effectively execute a massive share buyback by acquiring its own stock held by Diller’s conglomerate while gaining a portfolio of high-value publishing assets.
MGM Resorts International (MGM) has entered discussions to potentially acquire People Incorporated (PPLI), the media and internet conglomerate controlled by Barry Diller. The move, first reported by The Wall Street Journal, represents a dramatic reversal in the months-long saga between the two companies. Only 24 hours prior, People Inc. (PPLI)—formerly known as IAC—had abandoned its own $48.30-per-share offer to acquire the remaining 73% of MGM Resorts (MGM) it did not already own.
The proposed transaction would address a significant "conglomerate discount" currently affecting People Inc. (PPLI). The company’s market capitalization of approximately $2.7 billion is nearly identical to the value of its 27% stake in MGM Resorts (MGM), which is worth roughly $2.5 billion. By acquiring the conglomerate, MGM Resorts (MGM) would not only regain control of its own shares but also absorb Diller’s publishing titles, including People and Food & Wine.
Market reaction to the potential bid has been swift, with People Inc. (PPLI) stock rising sharply as investors anticipate a premium buyout offer. Conversely, MGM Resorts (MGM) faced heavy selling pressure during Thursday’s regular session, dropping to a six-month low of $34.42 before news of the potential counter-bid provided a late-day floor. CNBC reported that Diller’s initial retreat was motivated by concerns over the heavy debt load required to take the casino operator private, a hurdle that MGM Resorts (MGM) may be better positioned to navigate in a reverse-merger scenario.
The board of MGM Resorts (MGM), led by Chairman Paul Salem, has reaffirmed its commitment to the company’s independent growth strategy, highlighting the momentum of its BetMGM platform and international developments in Osaka, Japan. However, the strategic logic of "buying back" nearly a third of the company through an acquisition of People Inc. (PPLI) is seen by many on Wall Street as an efficient use of capital. If a formal proposal is made, it is expected to arrive within the coming days as both parties seek to resolve the current valuation impasse.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.