MGM, IAC Buying $405M in Stock from Corvex Management

Posted on: February 14, 2022, 07:25h. 

Last updated on: February 14, 2022, 11:38h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

MGM Resorts International (NYSE:MGM) and Barry Diller’s IAC/InterActiveCorp (NASDAQ:IAC) announced today they are buying nine million shares of the casino operator. The purchase comes from shares held by Keith Meister’s Corvex Management at $45 apiece in a transactions valued at $405 million.

Corvex MGM
Corvex Management founder Keith Meister in a 2021 CNBC interview. MGM and IAC are buying $405 million worth of MGM stock from the hedge fund. (Image: CNBC)

The gaming company and IAC are each buying 4.5 million shares from the hedge fund controlled by the MGM board member for $202.5 million. At $45, that’s slightly below the Mandalay Bay operator’s Feb. 11 closing price of $45.46.

The news arrives seven months after a Corvex Form 13F filing with the Securities and Exchange Commission (SEC). That revealed the money manager upped its MGM stake to 15.67 million shares during the second quarter of 2021. At that time, the hedge fund was the fourth-largest institutional investor in MGM, trailing only fund issuers Vanguard, BlackRock, and State Street.

Following the transaction, funds associated with Corvex will continue to own approximately 6.67 million shares, or 1.5 percent of the company’s outstanding common stock,” according to a statement issued by MGM and IAC.

Meister will retain his seat on the gaming firm’s board of directors.

Corvex, IAC Relationships Fruitful for MGM

Meister joined MGM’s board in January 2019, eventually becoming one of the leaders of the push for the company to monetize its real estate holdings.

That effort featured an array of transactions, including sale-leasebacks of Las Vegas Strip venues, such as Aria/Vdara, Bellagio, Mandalay Bay, and MGM Grand. Additionally, VICI Properties (NYSE:VICI) is acquiring MGM Growth Properties (NYSE:MGP) for $17.2 billion in stock, creating a $4.4 billion windfall for MGM via its stake in MGP.

As a result, MGM has $4.7 billion in cash and cash equivalents as of the end of 2021 — good for one of the strongest balance sheets in the gaming industry.

For its part, IAC took a 12 percent stake, then valued at $1 billion, in MGM Resorts in August 2020. As a percentage of MGM shares outstanding, IAC is by far the casino operator’s largest shareholder. That investment is paying off handsomely for Diller’s company, as the gaming company’s shares resided around $28 when the investment was announced.

IAC’s investment in MGM is seen as an endorsement of BetMGM and online gaming, with some analysts expecting the partnership to generate more buzz this year.

“Following the (Corvex) transaction, IAC will own approximately 63.5 million shares, or 14.4 percent of the company’s (MGM) outstanding common stock,” according to the statement.

MGM Buyback Bonanza Continues

MGM’s part of the share buy from Corvex is part of the company’s $3 billion repurchase plan — one of the industry’s largest and most active — announced in February 2020, meaning there’s $636.7 million left on that program.

“With this purchase, we have now bought back approximately 11.5 percent of our outstanding shares, showing our continued confidence in MGM stock,” said MGM CFO and Treasurer Jonathan Halkyard in the statement.

The transaction is scheduled to settle on Feb. 16. As of Feb. 12, the Bellagio operator has 444.8 million shares outstanding.