Diller’s $18B MGM Bid: Why Analysts Say the Price Is Too Low (But the Deal Will Likely Close)

(AsiaGameHub) –   By: Christian Brooks, a prominent financial and business lead commentator

US casino operators are stuck between a rock and a hard place. Slowing consumer demand weighs on revenue. Heavy debt burdens cramp their options. Consolidation feels like the only way out. But Barry Diller’s $18 billion bid for MGM Resorts has sparked a heated debate: is the offer high enough to reflect the company’s true value?

People Inc., Diller’s firm, already holds a 26.1% stake in MGM. It built that position during the pandemic when casino shares tanked. Now it’s offering $48.30 per share in cash for the remaining equity. That’s a 10.6% premium over MGM’s prior close of $43.67. The bid values MGM at over $18 billion, topping Tilman Fertitta’s $17.6 billion offer for Caesars Entertainment announced days earlier. MGM is larger than Caesars by revenue, global footprint and Las Vegas Strip presence. Caesars has more US physical properties, though. MGM’s Q1 2024 results show record consolidated net revenue of $4.5 billion, up 4% year-over-year. But adjusted EBITDA fell to $580 million, and net income dropped to $125 million. MGM controls 40% of the Las Vegas Strip. Sluggish visitor traffic has pushed it to rely on Macau holdings and its BetMGM joint venture, a top US online sportsbook.

Analysts are split on the bid’s value. Stifel argues it undervalues MGM, but notes private equity groups may partner with People instead of launching competing offers. Seaport Research Partners agrees the price is low, but says the bid signals genuine intent. It could push MGM to divest assets like MGM China or Osaka, triggering more sector deal-making. CBRE predicts the deal will close at a slightly higher price. A successful take-private would reshape MGM’s portfolio and spur more asset sales. The casino sector’s consolidation wave will accelerate, with Diller’s bid acting as the catalyst for more moves in the coming months.