MGM Alters Diller Voting Agreement, Door Open for Him to Approve Third-Party Takeover

MGM Resorts International (NYSE: MGM) and Barry Diller’s People Inc. (NASDAQ: PPLI) amended a voting agreement struck earlier this year, potentially opening the door for the media mogul to sign off on an acquisition of the casino giant by another suitor.

News of the fresh voting pact emerges about a month after Diller’s media company dropped an $18 billion takeover bid of the Bellagio operator. Under the agreement reached in April, Diller and other “covered entities” agreed to limit voting influence at the gaming company. However, in the wake of People’s acquisition offer, Diller made clear the media company wouldn’t support another third-party bid for MGM. The new agreement alters that stance.

MGM did not say it’s engaged in takeover talks with another suitor.

Diller Ownership of MGM Shares Capped

Previously known as IAC/InterActiveCorp, Diller’s company initiated its position in MGM in August 2020, controlling 12% of the gaming Goliath. Through additions to that stake and MGM’s prolific share buyback activity, Diller now owns more than 26% of MGM equity, making People the largest MGM shareholder.

Under the new voting agreement, People can add to its position in the Cosmopolitan operator, but only up to a certain point.

“The Covered Entities have also agreed to not purchase additional shares of MGM Resorts if doing so would result in their aggregate ownership exceeding 29.9% of the Company’s outstanding shares,” according to the statement. “For so long as the Covered Entities remain in compliance with the Agreement, MGM Resorts has agreed not to take defensive measures or actions designed to be adverse to the Covered Entities.”

MGM didn’t elaborate on what “defensive measures” could be “adverse” to People are, but it’s possible that could include adopting poison pill provisions if the media company makes an unwanted takeover advance on MGM.

No Obligations

MGM made clear the new voting agreement doesn’t obligate it or People to “enter into any transaction and none is contemplated.” Following the dissolution of the prior takeover talks, Diller expressed interest in a future “strategic transaction” with MGM, but nothing has come of that chatter as of yet.

For now, the casino behemoth appears intent on generating shareholder value as its stock is off 22.6% year-to-date.

“This agreement provides the Board with a clear path to maximize value through share repurchases and a change of control transaction, if applicable, in accordance with the Board’s fiduciary duties,” said Paul Salem, chairman of the MGM Resorts board, in the press release. “We value People, our largest shareholder, and Barry Diller, an MGM Resorts Director, both of whom will continue to help maximize value for all shareholders.”