Digital media company InterActiveCorporation (IAC), which has a history of buying, developing and selling online businesses announced today it had accumulated a significant share in MGM Resorts International. In a Schedule 13D filed to the Securities and Exchange Commission (SEC), IAC revealed it had acquired 12% in the casino operator, worth an estimated $1 bilion.
Online Gaming the Main Lure for the Minority Investor
IAC decided to invest in the gaming giant mainly due to the huge potential seen in the online gaming vertical which currently represents a tiny portion of MGM’s revenue, Barry Diller, Chairman and Senior Executive of IAC explained in the press release.
“IAC’s foundational concept of seeking opportunities to build interactive businesses is our base rationale – there is a digital first opportunity within MGM Resorts’ already impressive offline businesses, and with our experience we hope we can strongly contribute to the growth of online gaming.”Barry Diller, Chairman and Senior Executive, InterActiveCorporation
Joey Levin, CEO of IAC, pointed out that MGM Resorts was an opportunity for the digital company to own a piece of a brand in a large category with huge potential to move online. The role of a minority investor and a long-term strategic partner more than satisfies IAC, which will gladly welcome any opportunity for a meaningful contribution to the success of MGM Resorts, Mr Levin concluded.
IAC also published a letter to its shareholders in which Barry Diller and Joey Levin further elaborated on the “once in a decade” opportunity for the company that the stake in MGM Resorts represented.
The investment in the casino operator does not fit in any investment pattern of IAC so far due to four reasons, the letter outlined. First, the acquired position is a minority one in a public company. Second, the stake was acquired by purchasing common equity securities that are available for purchase or sale to any investor in the market. Third, the business in which the stake was acquired had little internet exposure, and fourth, the gaming industry represents an entirely new direction for the digital media developer.
“IAC has always been opportunistic with its capital, and if ever there was a time, this moment is unique. We believe we can generate compelling returns for our shareholders and hope our expertise will be additive to MGM’s opportunities, but even if we never advance our involvement from here, the value was too compelling to ignore.“
Analysis of the MGM’s resources, balance sheet and market position, as well as a level of undervaluation in the market, showed MGM was much similar to IAC, the letter to the shareholders highlighted. Owner of 35% of the rooms on the Las Vegas Strip and 8 regional gaming properties across the US plus 2 casino resorts in Macau and a strong candidate in Japan’s integrated resort (IR) project, MGM Resorts was identified by IAC as strongly positioned to retain its competitive position after the world returns to normal.