MGM Calls It Done: $18 Billion Take-Private Deal Collapses on Financing

MGM Resorts and Barry Diller's People Inc. have formally ended merger talks after an $18 billion take-private offer collapsed on financing, according to a Wednesday securities filing and CEO Bill Hornbuckle's earnings-call remarks.

The two sides signed an amended voting agreement that resets their relationship. Under its terms, People Inc. and Diller will vote their MGM shares in line with the board's recommendation on any change-of-control transaction, and People agreed not to raise its stake above 29.9%. MGM, in exchange, agreed not to take defensive measures or other actions adverse to People or Diller.

The price was never the problem.

What killed the deal?

People Inc., formerly IAC, approached MGM on June 1 with an offer to take the company private at $48.30 a share in cash. That represented a 10.6% premium and valued the transaction at roughly $18 billion. The buyer's thesis: public markets undervalued the business.

Hornbuckle said on the earnings call that the two sides "came to terms on price." The sticking point was capital. People could not assemble a financing syndicate (the bank and investor group needed to fund a leveraged buyout) and withdrew the offer in September.

An agreed price with no money behind it is, in deal terms, no deal at all. Five months of negotiation ended in a handshake over ground rules rather than a transaction.

Was MGM bidding for People Inc.?

The Wall Street Journal reported that MGM had weighed a bid for People Inc. itself. Hornbuckle addressed the report directly. The reciprocal discussions, he said, were about unlocking the value of People's roughly 25% stake in MGM, not about a conventional acquisition in either direction.

Asked whether any talks continue, Hornbuckle was categorical: both sides are done.

Where does MGM go from here?

The company is refocusing on operations. With the voting agreement amended and the 29.9% ceiling in place, People Inc. remains MGM's largest shareholder but is now constrained from building its position further. MGM, for its part, has surrendered the defensive toolkit it might otherwise have used against an unwanted approach — a reasonable trade if no approach is coming.

The standoff had real costs. A proposed take-private hanging over a casino operator for five months complicates capital planning, capital allocation and management attention alike. Its resolution, even without a transaction, returns a measure of certainty to both shareholder and operator.

For MGM, the next chapter is execution rather than dealmaking. Hornbuckle's message to investors was that the operator's value case now rests on running the business, not on repricing it.

The bottom line

An $18 billion offer at $48.30 a share — a 10.6% premium — died not on valuation but on syndication. The amended voting agreement, the 29.9% stake cap and the mutual stand-down tell the market that MGM's ownership structure is settled for now. Whether public markets reward the operational focus that Diller's group found undervalued is the question the rest of the fiscal year will answer.