MGM Resorts agrees $4.4bn real estate company share sale
Casino heavyweight hails “major step” in asset light strategy after offloading majority stake in MGM Growth Properties LLC to VICI Properties
MGM Resorts has sold its stake in its commercial real estate business, MGM Growth Properties LLC (MGP), to VICI Properties in a $4.4bn deal.
The agreement will see VICI acquire 100% of MGM’s shares in the MGP business at a price of $43 per share, a premium of 15.9% on the current share price as part of a deal which values the business at $17.2bn.
As part of the contract, MGM has negotiated an amendment and restating of the lease on its MGM Springfield property for an initial term of 25 years, with three 10-year renewals, at an initial annual rent cost of $860m.
This amount, MGM confirmed, is inclusive of the $400m sale of MGM Springfield to MGP as first agreed in May 2021.
“This lease will be guaranteed by the company and will provide the company with significant flexibility to manage its operations across the portfolio of properties covered by the lease,” MGM revealed.
As part of the agreement, MGM Resorts will own an approximate 1% stake in the VICI operating partnership, worth approximately $370m.
The transaction is expected to close in the first half of 2022, subject to customary closing conditions, regulatory approvals and approval by VICI stockholders.
Upon completion of this transaction and through previous retail sales, MGM Resorts has said it will have $11.6bn of funds available for reinvestment.
The company said the high level of liquidity will “enable execution of its goals of becoming the premier gaming entertainment company, returning value to shareholders and solidifying its balance sheet.”
MGM hailed the contribution made by MGP following its formation in 2016, drawing on the firm’s record of generating cash while also strengthening the company’s balance sheet and allowing for further investment.
MGM Resorts CEO and president Bill Hornbuckle hailed the role of MGP in allowing the wider MGM business to become more agile and financially secure.
“In 2016 we started on our journey to become asset light and this announcement, together with our recently announced Springfield and CityCenter transactions, reflects the culmination of those efforts and a major step forward in simplifying our corporate structure,” Hornbuckle explained.
“As a result of these actions, we are well positioned and remain focused on pursuing growth opportunities in our core business, with significant financial flexibility to continue to deploy capital to maximize shareholder value,” the MGM Resorts CEO added.
One such investment given life by the MGP partnership is the online BetMGM joint venture (JV) with Entain which has since become a major player in the US market.
In February, MGM Resorts launched an $11.06bn bid to acquire its JV partner, which was ultimately rebuffed by Entain as “significantly” undervaluing the business.