MGM & People Inc Agreed Price Before Takeover Bid Collapse

Summary:

• MGM Resorts CEO Bill Hornbuckle said the casino group and People Inc had agreed on a takeover price before the proposal was withdrawn.
• The reason: People Inc could not assemble the required investor syndicate.
• MGM Resorts said the revised agreement leaves the door open to share repurchases or a potential future change of control.

MGM Resorts International and its largest shareholder, People Inc, had agreed on a price for a proposed takeover before the bid was withdrawn, MGM Resorts CEO Bill Hornbuckle said during a conference call on the casino group’s third-quarter results.

They Came to Term on Price But Couldn’t Assemble a Syndicate

Hornbuckle said People Inc had been unable to assemble an investor syndicate to finance the proposed acquisition, which was first tabled in June.

People [Inc] and the MGM Resorts special committee came to terms on price, but in the end, People [Inc] was unable to assemble a syndicate that met their objective and then withdrew their offer.

People Inc’s withdrawal ends the current takeover discussions, with Hornbuckle indicating that MGM Resorts management remains focused on operating the business and pursuing its long-term strategy.

MGM Resorts is the parent company of Macau casino operator MGM China Holdings and is also involved in developing an integrated resort in Osaka, Japan.

Setting Ownership Limits

Following the withdrawal of the takeover proposal, MGM Resorts and People Inc amended their existing voting agreement.

Under the revised terms, People Inc, Barry Diller and certain associated parties have agreed, subject to specified conditions, to vote their MGM Resorts shares in line with the casino group’s board recommendations in any change-of-control transaction.

The agreement also prevents the group from acquiring additional MGM Resorts shares if doing so would push their combined ownership above 29.9% of the company’s outstanding shares.

In return, MGM Resorts has agreed not to introduce defensive measures or take actions adverse to those shareholders, provided they comply with the agreement.

Hornbuckle said the arrangement aligns the company’s largest shareholder with MGM Resorts’ long-term strategy and its goal of maximizing value for shareholders.

MGM Resorts chairman Paul Salem said the revised agreement gives the board a path to pursue shareholder value through share repurchases and a potential change-of-control transaction, subject to its fiduciary duties.

The company stressed that the agreement does not require either party to pursue a transaction and that no such deal is currently contemplated.