One of the recent happenings in the gambling industry in the United States comes from an unusual entity and that it the real estate investment trust that owns the land on which MGM Resorts casinos are built. MGM Growth Properties stated this Tuesday that it wants to merge with VICI Properties which owns the land under Caesars Entertainment venues. It became known that MGP has made a proposal to VICI offering $19.50 a share. This amounts to some $6 billion for the entire merger arrangement, but the outcome of it is still unknown.
The MGM Resorts spun off the real estate investment trust back in 2016 when the company was in need of amassing capital in the fastest way possible. This type of trusts receives significant tax breaks under the condition that they distribute a minimum of 90 percent of their income to their unit holders or shareholders. The landlord’s merger move has been considered for some time, as MGP could benefit from the proposed deal in many ways. The investment trust which acts as landlord for the properties of MGM Resorts claimed that it is ready to purchase all of the outstanding shares belonging to VICI and this could happen in a quick fashion.
On the other hand, VICI Properties is the owner of the land under the Caesars locations and it came into existence following the prolonged three-year restructuring process of Caesars Entertainment. It could be recalled, that the international casino operator when through a rough patch which involved filing for bankruptcy, as well as more than $160 million in legal fees which the company had to pay during the restructuring affairs.
Now the investment trust is being offered the chance to merge with MGP, but it seems like the proposal was unsolicited from the get-go. For the time being, VICI has opted for not engaging in any meaningful discussions and the potential outcome of the proposition remains in the unknown.
Outcome of the Proposed Merger
If the move succeeds, MGP is going to acquire many more gambling properties and double their number to a total of 32. It will also own double the hotel rooms it operates at the moment and swell them to 42,000, while in the meantime increasing the gambling and convention space to the impressive 5.9 million square feet.
MGP will also manage as many as nine resorts on the Las Vegas Strip, turning MGM Resorts into one of the leading gambling operators in the area. To the already existing properties under the management of the company, the merger will add Caesars Palace and Harrah’s Las Vegas.
As for the shareholders at VICI, they will own 43 percent of the combined company which will turn the real estate investment trust into the 13th largest of its kind in the United States when enterprise value is taken into account. The development of the situation which is essentially a business transaction between two landlords is eagerly anticipated by experts in the field.