Susquehanna: ‘High Probability’ of MGM Landing Higher Takeover Offer

Already the target of a takeover offer from Barry Diller’s People Inc. (NASDAQ: PPLI) valuing it at $18 billion, MGM Resorts International (NYSE: MGM) could potentially draw interest and higher offers from other suitors, says a sell-side analyst.

The Bellagio operator delivers second-quarter results after the close of U.S. markets tomorrow and if the numbers are strong, that could justify a competing bid to the $48.30 a share People offered on June 1, according to Susquehanna analyst Joseph Stauff.

Some analysts believe that Diller’s offer is too low, speculating that MGM is worth $55 to $60 a share, perhaps more, but they’ve also acknowledged that scope for a competing bid is limited because People owns 26.1% of the casino operator’s shares outstanding and is unlikely to support a takeover offer that isn’t its own. It’s been nearly two months since Diller revealed his acquisition proposal. In that time, MGM hasn’t commented beyond saying it received the bid, though it has formed a special committee to evaluate the pitch.

Unlocking ‘Trapped Value’ at MGM

Stauff notes other bidders could get involved with MGM to unlock “trapped value” at the casino giant, sources of which include BetMGM and the MGM China business. The analyst also points to other mergers and acquisitions possibilities as a possible source of allure for another suitor.

Stauff also highlighted the Las Vegas Strip’s rising status as a “sports first” destination as another reason why MGM could land a competing takeover offer. Sin City is already home to teams from two of the four major North American sports leagues with Major League Baseball slated to join the fray in 2028. The NBA is targeting the 2028-29 season for adding a team to Las Vegas.

As for unlocking value with MGM, MGM China may be one way of doing that. The Las Vegas-based company controls 56% of the Macau operator and there’s been some chatter that Diller himself would look to part with that entity as well as MGM’s Japan business if he’s successful in acquiring the company.

BetMGM is a different beast. Entain Plc (OTC: GMVHY) and MGM each own 50% of BetMGM, meaning the former has to be onboard with any value-unlocking efforts pursued by the latter.

Speaking of BetMGM…

BetMGM released second-quarter results today, noting net revenue rose 3% year-over-year to $711 million, helped by an 8% increase in iGaming revenue. However, the operator cautioned it expects full-year results will come in at the lower end of previously issued guidance of sales of $2.9 billion to $3.1 billion and earnings before interest, taxes, depreciation, and amortization (EBITDA) of $300 million to $350 million.

Additionally, BetMGM pushed out its timeline for delivering $500 million in EBITDA, citing “the current market environment including impact of prediction market regulatory complexity.” Originally, that bar was expected to be cleared in 2027.

Whether any of that compels Entain to consider divesting its interest in the online sportsbook operator remains to be seen, but Jefferies analyst James Wheatcroft notes that at 7.1x enterprise value/EBITDA, “we see zero value for BetMGM priced into Entain.”