Diller’s MGM Takeover Offer Targeted by Shareholder Rights Law Firm

Barry Diller’s attempt to acquire MGM Resorts International (NYSE: MGM), the casino operator in which his People Incorporated (NASDAQ: PPLI) is the largest shareholder, is drawing scrutiny from a securities law firm.

Securities law firm Bleichmar Fonti & Auld LLP has launched an investigation into Barry Diller’s $48.30 per share takeover bid for MGM Resorts. The firm is examining whether the media mogul’s acquisition effort violates his fiduciary duties as an MGM board member and major shareholder.

Prior to the revealing of the acquisition offer, Diller, a member of MGM’s board of directors, and the gaming company reached an agreement under which his voting power is limited in certain circumstances.

He controls more than 26% of MGM’s shares outstanding and has made clear he’s unlikely to support any takeover effort that isn’t his own.

Plenty of Scrutiny on Diller’s MGM Takeover Overture

Bleichmar Fonti & Auld isn’t the only entity examining Diller’s attempt to acquire the Cosmopolitan operator. Some sell-side analysts view the $48.30 per share offer, which values MGM at $18 billion, as too low, though they acknowledge there is little room for a rival suitor to emerge.

Similarly, some People Inc. investors are unenthusiastic about Diller’s gamble. In an August letter to shareholders of the media and holding company, Yakira Capital—a long-term shareholder of People Inc.—called the MGM takeover risky, particularly at a time when the parent company’s shares trade at a “negative valuation.”

Yakira went so far as to suggest that People Inc. abandon the MGM takeover gambit, liquidate its stake in the casino operator, and use the proceeds to repurchase its own shares.

“If PPLI simply sold its MGM shares and used the proceeds to retire its own stock, the sum of the parts value jumps to over $190,” according to the letter.

To date, MGM has merely confirmed receipt of Diller’s offer while telling investors it formed a special committee to evaluate the bid.

Somewhat Similar to Caesars Situation

It’s common for securities law firms to investigate mergers and acquisitions and a similar situation is brewing at MGM rival Caesars Entertainment (NASDAQ: CZR).

Earlier this month, Wohl & Fruchter restarted an inquiry into Fertitta Entertainment’s proposed $17.6 billion takeover of the Harrah’s operator on the grounds that the $31 per share bid may be too low.

The primary difference between the two inquiries is progress: Caesars has already accepted Fertitta’s offer, with its board recommending shareholders vote in favor of the deal. MGM’s board has not yet taken a formal position.