Tables Turned: MGM May Swoop In with Bid for Diller’s People

The hunted may now be the hunter as MGM Resorts International (NYSE: MGM) is rumored to be mulling an acquisition of People Inc. (NASDAQ: PPLI) — the media company that pursued a takeover of the casino giant and is its largest shareholder. The Bellagio fountains at night. Operator MGM Resorts is rumored to be considering a bid for People Inc. (Image: Shutterstock) Late Thursday, barely 24 hours after Barry Diller’s company pulled its $48.30 per share acquisition offer for MGM, The Wall Street Journal reported that the Luxor operator is considering making a run at The Daily Beast publisher. In after-hours trading, shares of MGM traded slightly lower on the news while People surged 9.13%. What Would MGM Want With People? On the surface, a casino company acquiring the publisher of Food & Wine, Investopedia and Travel + Leisure, among other publications, seems like an odd fit, but as the Journal points out, MGM could be motivated to get its hands on its equity currently controlled by the media company. People owns approximately 27%, implying that MGM — long aggressive in repurchasing its shares — could retire a significant portion of its float by acquiring the media company and potentially do so at a favorable valuation. As of the close of U.S. markets today, MGM sports a market capitalization of $9.52 billion, meaning People’s stake in the Bellagio operator is worth $2.57 billion. However, the market value of Diller’s company is $2.68 billion, perhaps implying that the investors that have argued that the stock price assigns essentially no value to the MGM stake are correct. It remains to be seen if MGM moves on People, but if it does, the suitor could significantly reduce its float at favorable terms while gaining other assets it could later sell to raise even more capital. Divestments Are Possible For the moment, a leap of faith is required when it comes to MGM making an offer for Diller’s company, though the media mogul said after he pulled his takeover offer that he’s open to “strategic” deals with the gaming operator. Assuming that MGM eventually comes to own People, not only would it dramatically shrink its shares outstanding tally thus boosting earnings per share, but it could raise a considerable amount of cash by selling off People’s media holdings and non-core assets. Earlier this year, the company announced a name change and corporate reconfiguration with an emphasis on what it deemed as core assets. Those being the MGM investment and its more than 40 media brands. People’s non-core holdings are The Daily Beast, a healthcare staffing firm and Turo, the peer-to-peer car rental service. Diller’s company holds a minority investment in Turo, which is valued at $1.1 billion to $1.3 billion in private markets. The post Tables Turned: MGM May Swoop In with Bid for Diller’s People appeared first on Casino.org.