LAS VEGAS (KTNV) — It's the second major casino purchase offer in two months, but it didn't surprise one longtime observer of the Las Vegas gaming business.
News broke Monday that businessman Barry Diller had made an $18 billion offer to purchase MGM Resorts International. Diller sits on the company's board and already owns 26% of its stock.
Steve Sebelius explains the push to purchase MGM Resorts and what it could signal about the future of the gaming business in Southern Nevada:
The news comes shortly after businessman Tilman Fertitta announced a $17.6 billion bid for Caesars Entertainment.
"I was not at all surprised," said Alan Feldman, a gaming expert and former MGM Resorts International executive. "MGM stock has been undervalued for a very, very long time, and the company has very consistently improved its balance sheet, tightened its operations, kept its cash flow going in a positive direction. If I was surprised by anything, it was that it's taken this long."
Feldman, who is now director of strategic initiatives for the International Gaming Institute at UNLV, says he's heartened by the fact that the men behind the big-money bids were familiar with Las Vegas.
"In both of these cases, — speaking now from a Nevada perspective — in both of these cases, Tilman Fertitta with Barry Diller, you have trusted hands," Feldman said. "You have people who know this industry. You have people who've been in this industry, or in it now, and I think that's so much more comforting than just some random hedge fund coming in and saying, 'Oh yeah, let's do this,' where we've seen mixed results. Not all bad, but mixed results."
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In making his bid, Diller told shareholders of his own company, People Inc., that MGM had been "wildly undervalued." Stocks soared at news of his bid, topping $50 per share, even higher than his $48.30 per share offer.
Feldman said casino companies get a bad rap on Wall Street, especially amid headlines predicting the death of Las Vegas because of higher prices.
"Part of what scares off Wall Street about gaming stocks, I think, is what they perceive to be volatility. They perceive it to be that if fluctuates regularly, and actually it doesn't," he said. "You know, if you look at the long history of the industry, you see nothing but growth over six, seven decades."
Feldman also said Diller's bid shows that MGM is poised for even more growth into the future.
"The more we keep giving people reasons to come, we're fine," he said. "You can have gaming everywhere, but gaming isn't what is actually driving Las Vegas. It's everything else. That's the part we have kind of missed in the last 20 years."
Fully apart from casinos, Las Vegas now offers entertainment venues such as Allegiant Stadium and the Sphere, as well as professional hockey, football, women's basketball, NASCAR, and soon, baseball. That's on top of restaurants, shopping and amenities like spas.
"The gaming is an important part, maybe even a key part of the picture for Las Vegas, but it isn't the only part," Feldman said.
How will the potential sale affect customers or employees? Feldman said any transition would be virtually unnoticeable.
"I don't think it's going to have much of an effect on customers or employees," he said. "I think — especially because, again, in the case of Mr. Diller, he's been on the board of MGM for a very long time — he knows that business; he knows how it runs; he is unlikely to come in and just turn it upside down or break it all apart. That seems unlikely."
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