Las Vegas-based casino operator MGM Resorts International announced on Tuesday that it will pay US$327.5 million to purchase 10 million shares of its common stock from Tracinda Corp. The casino operator will pay US$32.75 per share, a 1-percent discount to the market closing price on Monday, the firm said in a press release.
Following the transaction, Tracinda – the fund managing the capital accumulated by the late entrepreneur Kirk Kerkorian – will own approximately 47.1 million shares, or 8.3 percent, of MGM Resorts’ outstanding common stock.
“We believe today’s announcement represents a prudent and efficient way of buying back a considerable amount of our stock at an attractive price,” said Jim Murren, chairman and chief executive of MGM Resorts, in a prepared statement.
“This transaction remains consistent with our stated long-term strategy of utilising our cash to maximise value for our shareholders while maintaining a strong financial position,” he added.
MGM Resorts stated that the repurchase of 10 million shares currently held by Tracinda is expected to occur today (Wednesday). The deal will be conducted under the terms of the recently-announced US$1.0-billion stock repurchase programme, leaving a balance of US$672.5 million still available for share buy-backs, said the casino firm.
The company additionally said it intends to purchase the Tracinda-held shares in question using borrowings under MGM Resorts’ senior credit facility, which it expects to repay with the proceeds from a recently-announced deal to sell its MGM National Harbor casino resort to MGM Growth Properties LLC, a publicly-traded real estate investment trust (REIT). Under the latter deal – due to be completed in the fourth quarter 2017 – MGM Growth Properties will pay a total consideration of approximately US$1.19 billion for MGM National Harbor, including US$462.5 million in cash.
Commenting on the most recent announcement, analysts Carlo Santarelli and Danny Valoy of Deutsche Bank Securities Inc said they believed that “putting the [US$1.0-billion share buyback] authorisation to work, as well as the easing of the Tracinda overhang, will likely be perceived as a net positive” for MGM Resorts.
In 2015, Tracinda had the largest single holding in MGM Resorts – a 16.19-percent stake – but Mr Kerkorian gave orders in his will for the fund to sell the entire stake in the Las Vegas-based casino and hotel operator.
MGM Resorts is the parent company of Macau-based casino operator MGM China Holdings Ltd. In 2016, Pansy Ho Chiu King – a major shareholder and executive director in MGM China – had acquired 4 million shares of MGM Resorts stock at US$25.00 per share from Tracinda. Following the completion of that deal, Ms Ho was said to hold a stake of approximately 4.8 percent in MGM Resorts.
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”So far the Macau government has never failed us. And I think we have always been rewarded appropriately for the amount of investment”
Lawrence Ho Yau Lung
Chairman and chief executive of Melco Resorts and Entertainment