MGM Resorts Receives $1 Billion from IAC For 12% of Company

MGM Resorts Receives $1 Billion from IAC For 12% of Company

IAC announced Monday that it has accumulated a 12% interest in MGM Resorts International – and that online gaming piqued IAC’s interest in buying into a company that’s outside its normal interests.

IAC/InterActive Corp has spent about $1 billion to buy a minority share in publicly traded MGM Resorts, which has made moves recently to increase its share of the sports betting market and strengthened its relationships with major sports leagues through its BetMGM sportsbook brand.

For instance, BetMGM and the PGA Tour announced last week that they had agreed on a multi-year deal for sports betting content and marketing. In 2019, MGM became the first official sports betting partner of Major League Soccer, and MGM has struck several deals with individual teams in major North American sports leagues.

“What initially attracted us to MGM, besides its leadership in leisure, hospitality and gaming, was an area that currently comprises a tiny portion of its revenue – online gaming," IAC Chairman and Senior Executive Barry Diller said in a company news 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."

MGM shares had a sharp 22% increase on the heels of the announcement and shares of IAC increased 1.4% in early trading on Monday, Bloomberg.com reported.

BetMGM currently has physical or online sportsbooks in Colorado, Indiana, Michigan, Mississippi, Nevada, New Jersey and West Virginia, with more states on the way. And MGM Resorts struck a deal last year with Yahoo to provide the internet giant with sports betting content.

For its Indiana sportsbook, BetMGM partnered with Belterra Casino in Florence, about 50 miles from Cincinnati, to open its mobile betting app. The app has found a niche there, placing third out of eight online betting options in the state for July sports betting handle at $3.5 million (albeit a fair distance behind market leaders DraftKings and FanDuel) in figures released Monday by the Indiana Gaming Commission.

MGM Resorts International recently reported a 91% drop in second-quarter consolidated net revenue compared to Q2 in 2019. That fall can mostly be blamed on brick-and-mortar casinos being closed because of the coronavirus pandemic. After closing in mid March, MGM’s resorts began reopening May 25 when the Gold Strike Tunica in Mississippi got back into operation. But even with most casinos having reopened, they are running at reduced capacity.

What Sparked IAC’s Interest in MGM

A letter to IAC shareholders said, in part, that “we believe MGM presented a ‘once in a decade’ opportunity for IAC to own a meaningful piece of a preeminent brand in a large category with great potential to move online.” The letter also pointed out that “we invested a portion of our cash in a new direction for IAC.”

IAC, with headquarters in New York, owns 10 companies, which operate several name brands including Vimeo, Ask.com, Dotdash, Angie’s List, Investopedia and Care.com. In its letter to stockholders, IAC expressed confidence that, assuming business gets back to pre-coronavirus levels, “MGM will be just as capable post-pandemic as it was pre-pandemic in servicing visitors in over 35% of the Las Vegas Strip's available rooms, plus eight regional properties across the US, two in Macau, and hopefully in Japan.”

The letter also stated that IAC had been eager to enter the online gaming market but that it was seeking the right opportunity.

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