Barry Diller's People Inc. Drops $48.30-a-Share Bid for MGM Resorts, Erasing Takeover Premium

Barry Diller's People Incorporated has walked away from its bid to take MGM Resorts International private, ending nearly four months of boardroom negotiation and wiping out the takeover premium that had underpinned the casino operator's stock since early summer. People Inc., the New York media and internet holding company formerly known as IAC, announced on September 23 that it had withdrawn its non-binding proposal to buy the roughly three-quarters of MGM it did not already own, sending shares of the Las Vegas-based operator down as much as 11 percent the following session.

A collapsed premium

The offer, first laid out in a June 1 letter to MGM's board signed by Diller, proposed to acquire all outstanding MGM common stock that People Inc. did not already hold for $48.30 a share in cash. That price represented a 24.1 percent premium to MGM's 30-day volume-weighted average share price, a premium of more than 30 percent to the 90-day average, and a 10.6 percent premium to the stock's last close before the bid, according to the filing. People Inc. said at the time it expected to end up owning just over 50.1 percent of the combined company, funded through a mix of cash on hand and new debt and equity financing, with MGM's existing management staying in place.

Once the proposal was pulled, that arithmetic reversed almost overnight. MGM shares, which had closed at $37.85 the day the withdrawal was announced, fell to $33.69 the next trading day, a decline of nearly 11 percent, and continued to slide toward the low $30s by the end of the week, according to Yahoo Finance's tracking of the move. The retreat erased most of the gap between MGM's trading price and the $48.30 offer that investors had been pricing in as a floor since June.

Six years in the making

People Inc. has been an MGM shareholder since 2020, when it was still IAC, and the two companies' fortunes have been intertwined ever since. Announcing the bid on June 1, Diller said the company began investing in MGM "because we believed it represented a rare kind of business: one with real world assets that AI cannot easily replicate or disintermediate," language that appeared in the press release announcing the proposal, which put People Inc.'s stake at 26.1 percent of MGM's outstanding shares at the time.

MGM's board responded by forming a special committee of independent directors with no ties to Diller or People Inc., working with outside financial and legal advisers to evaluate the offer. Over the following months the committee negotiated with People Inc. even as MGM continued to report quarterly results and press ahead with its own capital projects, including the roughly $8.8 billion MGM Osaka casino resort in Japan. By September, according to both companies, the two sides had been unable to agree on terms, and People Inc. opted to drop the proposal rather than raise its price or restructure the deal.

Winners, losers and a stock reset

The most direct effect fell on MGM's ordinary shareholders, who lost the arbitrage-style premium that had supported the stock for months, and on options and merger-arbitrage traders who had positioned for a deal to close. People Inc. itself is largely insulated: the company said in its withdrawal statement that it continues to hold 66.8 million MGM shares, or about 27 percent of the company, up slightly from its stake in June, and that it has "total confidence in both the management and the Company's prospects."

"There are lots of ingredients that go into a proposal of this kind on its way to completion. We didn't feel the mix was coming together in the way we had hoped and have decided not to pursue taking the company private at this time," said People Incorporated Chairman and Senior Executive Barry Diller.

Wall Street's reaction was swift. Susquehanna Financial Group cut its price target on MGM to $46 from $55 while keeping a positive rating, and Mizuho's Ben Chaiken trimmed his target to $55 from $60, telling clients the withdrawal was "not terribly surprising" given the gap between the $48.30 offer and what MGM's board appeared willing to accept, according to a summary of his note. Both analysts kept bullish or neutral-to-positive ratings on the stock, framing the sell-off as an overreaction to the loss of a premium rather than a verdict on MGM's underlying business.

What comes next

MGM's board wasted little time signaling its next move. In a statement issued the same day as the withdrawal, board chairman Paul Salem said the directors "remain excited to continue to lead MGM Resorts as a standalone company," pointing to its position on the Las Vegas Strip, its regional casino portfolio, the continued growth of its BetMGM sports-betting joint venture, and its international footprint through MGM China and the planned MGM Osaka resort. That project, on the man-made island of Yumeshima in Osaka Bay, remains on track for an autumn 2030 opening, according to a recent report by Macau Business, and is expected to be Japan's first licensed casino resort.

For its part, People Inc. left the door open to a different kind of transaction down the road. "We at People Incorporated remain open to and interested in the possibility of a strategic transaction with MGM Resorts and look forward to considering a range of alternatives," Diller said in the withdrawal announcement, without specifying what form that might take. Neither company has indicated a new timeline for talks, and MGM's board said it intends to proceed with its standalone strategy in the meantime. Analysts said the near-term focus for investors will shift back to MGM's operating results, including Las Vegas visitation trends, BetMGM's path to profitability, and progress on the Osaka build-out, now that the takeover overhang has lifted.