Diller’s MGM Takeover Offer Draws Scrutiny from Law Firm

Barry Diller’s attempt to acquire MGM Resorts International (NYSE: MGM), the casino operator in which his People Inc. (NASDAQ: PPLI) is the largest shareholder, is drawing scrutiny from a securities law firm. MGM Grand on the Las Vegas Strip. Barry Diller’s attempt to acquire MGM is drawing scrutiny from a securities law firm. (Image: MGM Resorts International) New York-based Bleichmar Fonti & Auld LLP announced today that it is investigating the media mogul’s $48.30 per share takeover bid for the Bellagio operator on the grounds that the acquisition effort may stand in opposition to Diller’s fiduciary obligations to the gaming company and its investors. “Because Diller ‘stands on both sides’ of the proposed deal, and because other MGM fiduciaries could potentially receive benefits that other stockholders do not receive, these facts create a create conflicts of interest under Delaware law,” according to a statement issued by Bleichmar Fonti & Auld. “If MGM and Diller reach an agreement, they must comply with Delaware’s strict requirements for ‘cleansing’ these conflicts and ensuring the deal is fair to MGM’s stockholders.” 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 applying scrutiny to Diller’s attempt at acquiring the Cosmopolitan operator. Some members of the sell-side community view the $48.30 per share offer, which values MGM at $18 billion, as too low, though they acknowledge there’s not much room for another suitor to emerge. Likewise, some People investors aren’t enthusiastic about Diller’s gamble. In an August letter to shareholders of the media company, Yakira Capital – “a long-term shareholder of People” – said the MGM takeover is risky, particularly at a time when the media company’s shares trade at a “negative valuation.” “The timing is also particularly difficult to understand. Economic uncertainty remains elevated, consumer spending is slowing, and the long-term competitive landscape for online gaming continues to evolve,” according to the money manager. “At the same time, the market is signaling that MGM shareholders expect a higher price, meaning any successful acquisition would likely require an even greater premium.” Yakira went so far as to say that People should drop the MGM takeover gambit and liquidate its stake in the casino operator, using those 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 big difference between the law firm-led inquiries into the Caesars and MGM takeovers is that the former has accepted Fertitta’s offer with its board recommending that investors vote in favor of it at a special meeting to be held on Wednesday, Sept. 22. MGM hasn’t gone that far as of yet. The post Diller’s MGM Takeover Offer Draws Scrutiny from Law Firm appeared first on Casino.org.