Morningstar

MGM: Barry Diller’s People Seeking Full Ownership of Firm’s Leading Gaming Assets

We think a deal is likely to be approved by shareholders and be completed.

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Securities in This Article
MGM Resorts International
(MGM)

Key Morningstar Metrics for MGM Resorts International

  • Fair Value Estimate
    : $48.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : High

On June 1, Barry Diller’s People announced a cash offer of $18 billion, or $48.30 per share, for the 73.9% of MGM Resorts International MGM that it doesn’t own. The offer follows Diller’s initial $1 billion investment in August 2020, when he touted MGM’s omnichannel opportunity.

Why it matters: We don’t see many synergies with People’s media-related assets, but MGM holds an attractive presence in key gaming markets. We think competing bids are unlikely, given Diller’s current 26.1% voting interest in MGM and peers’ challenged financial positions.

  • We calculate that MGM holds a 6% revenue share of the US commercial gaming market, with 25% of Vegas rooms, one of three integrated resorts in the Boston area, and one-third of the online share. It also has the number-three share in Macao and the only license in Japan (scheduled for 2030).
  • Las Vegas Sands and Wynn Resorts are not positioned to bid for MGM, as they have significant net debt and massive capital spending plans. Meanwhile, Caesars is in the process of being acquired, and its high (8%) share of the US gaming market could bring regulatory problems if it were to bid for MGM.

The bottom line: Although the stock surged above $50 per share on the announcement, we maintain our $48 fair value estimate for no-moat MGM. We think a deal is likely to be approved by shareholders and be completed.

  • Interest in Caesars’ and MGM’s assets supports our view that predictive markets are set to expand the gaming market opportunity rather than cannibalize it. We see prediction markets allowing traditional players entry into the 18- to 20-year-old cohort and new states.
  • We estimate the US online gaming market can reach $61.0 billion in revenue by 2030 from $27.5 billion in 2025, with BetMGM largely holding its high-single-digit share.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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