Will MGM bid for People Inc instead of the other way around?

Takeover talks between MGM Resorts and People Inc may have flipped.

In the same week that Barry Diller’s People Inc rescinded an $18 billion offer to acquire the 73% of shares in MGM Resorts that it does not already own, reports have surfaced that the tables may be turning, with MGM reportedly mulling a takeover bid for People instead.

The Wall Street Journal was first to report the potential change in events late Thursday, citing sources close to the matter. From a market perspective, the rescinded offer and potential switch have been favourable to People Inc – its shares are up 10% on the week. MGM, meanwhile, has seen its shares decline almost 15% during that span.

Diller began investing in MGM in 2020 and his current 27% stake is believed to carry around the same value as People’s $3 billion market capilisation, per the WSJ report. In a statement confirming the end of the MGM takeover talks, Diller said the “ingredients” of the deal were not “coming together in the way we had hoped”.

He also said, however, that he had “total confidence” in MGM, adding that People Inc remained “open to and interested in the possibility of a strategic transaction with MGM Resorts”.

People declined to comment to Reuters and MGM did not respond to a request from iGB.

Casinos, sports betting and publishing?

Diller had coveted MGM’s tangible assets in a business environment that is increasingly centred on AI and technology. Buying MGM would have been a way to diversify the company’s holdings and guard against potential AI-related impacts to its media and publishing businesses.

Conversely, it is not immediately clear what kind of strategic value MGM would gain from acquiring People, which publishes brands like People magazine, Food & Wine and more. The casino operator has seen its stock lose a quarter of its value in the last month alone.

MGM Chairman Paul Salem gave no indication about pursuing an acquisition when responding to Diller’s exit from the negotiating table. Salem said in a statement on Wednesday that the company had a “clear path to increasing shareholder value” through its existing strategies.

Analysts remain bullish on MGM, with the general consensus being that difficulties related to borrowing costs and regulatory approvals likely killed the deal rather than issues with MGM itself. Macquarie analyst Chad Beynon called MGM’s implied enterprise value of about $5.9 billion “a striking discount”, while Barry Jonas of Truist maintained a “Buy” rating with a price target of $55, well above its current price of about $32.50.