Over the past few months New York-based IAC has accumulated a 12% stake in global hospitality and entertainment company MGM Resorts International for $1 billion.
MGM Resorts is a leader in leisure, hospitality and gaming, but IAC is zeroing in on an area that comprises a tiny portion of its revenue—online gaming, according to Barry Diller, chairman and senior executive of IAC. "IAC's foundational concept of seeking opportunities to build interactive businesses is our base rationale—there is a digital first opportunity within MGM Resorts' already impressive offline businesses, and with our experience we hope we can strongly contribute to the growth of online gaming," he said in prepared remarks.
Diller also said that IAC has $3.9 billion of cash, no debt, and "opportunistic zeal".
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The company is not discounting the long-term solvency of MGM's brick-and-mortar operations, though.
Like many hotels and casinos, especially those with a heavy footprint in Las Vegas, MGM has found that the current pandemic has brought revenue (though not expenses) to a temporary halt, IAC said in a letter to its shareholders. MGM has had to repurpose cash it had stockpiled for share repurchases to instead defend the solvency of the company. "The good news is, we believe MGM has enough cash and access to capital to make it to the other side competitively stronger," the letter said.
"When the world returns to normal, MGM will be just as capable post-pandemic as it was pre-pandemic in servicing visitors in over 35% of the Las Vegas Strip's available rooms, plus eight regional properties across the US, two in Macau, and hopefully in Japan."
When Las Vegas fully re-opens—even if it must wait until a vaccine for that to occur—we expect it to roar back, IAC continued in its letter to shareholders: new NFL team, a new stadium, a drivable destination, and months of pent-up demand could drive a powerful resurgence, it said.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
