There is speculation that MGM and Caesars Entertainment are linked.
According to a person familiar with the matter, MGM has enlisted the help of Morgan Stanley and Weil, Gotshal & Manges to begin exploring the possibility of a massive merger.
However, according to reliable sources, no such offer has been made.
A group of activist hedge funds, which collectively own approximately a quarter of Caesars’ failing stock, has been pushing for an MGM acquisition. Year to date, Caesars shares are down 25%, while MGM shares are down 15%.
A number of these funds, including Canyon Partners, which has a significant position in both companies, were seen to be behind Caesars CEO Mark Frissora’s resignation last week.
A person with firsthand knowledge of the matter remarked, “Everyone understands that Caesars is in play without a CEO.”
The head of Canyon’s lodging and gaming operations, Chaney Sheffield, is pushing a casino colossus, in part to save money on overhead and marketing, according to the source.
Sources close to the matter tell a second gaming source that the following three or four months will be interesting.
In Las Vegas and Atlantic City, MGM and Caesars would control half of the hotel rooms. Both states may have reason to be concerned about the effects of such a dense concentration.
The total amount of MGM’s equities and debt is $30 billion, while the value of Caesars’ chips is $22 billion.
Tilman Fertitta’s Golden Nugget casino network recently made a buyout offer to Caesars, but the company rejected it.
Sources claim the setup is ideal for activist hedgies, with MGM serving as the white knight.
On the other hand, Caesars may not be the only one in town.
Speculation is rife that Wynn Resorts, which has an $18 billion enterprise value, may join the table if it retains its license to build a casino in Boston.
In addition, sources say, private equity groups who have a license to operate casinos, such as The Blackstone Group, may be interested in purchasing Resorts World at Aqueduct Racetrack in New York City.
Also, Caesars is in talks to buy several of Jack Entertainment’s Ohio casinos, although a source says that effort could be derailed by tax issues, as previously stated.
As for Canyon, it would only say that it had not signed a confidentiality agreement with MGM and declined to speak on the matter further.
MGM currently holds sway in Las Vegas, but it could soon splash in Macau.
Las Vegas’ MGM hotels can be found all along the Las Vegas Strip, making it by far the most powerful player in the city. Hotel rooms and entertainment venues make up a large portion of the company’s portfolio. Vegas’ non-gaming entertainment revenue is expanding strongly while the gaming sector remains stable.
Last year, the T-Mobile Arena was inaugurated by MGM. Concerts, conventions, and the Golden Knights, an NHL expansion team set to play in the 2017-2018 season, will all occur here. In addition, the new MGM National Harbor resort, which is located just outside of the nation’s capital, is a noteworthy addition to the company’s portfolio. This year and next, the business expects to see a significant increase in EBITDA from National Harbor, which opened in December.
One thing that could truly propel the company forward is constructing its own new Macau resort later this year. After months of delays, MGM is the latest of these businesses to launch a Macau resort, but that could be a good thing, as the market appears to be stronger now. The 1,400-room resort is expected to significantly impact the company’s revenues over the next few years.