Digital media giant InterActiveCorporation (IAC) has acquired a 12% stake in MGM Resorts International, describing the investment as a “once in a decade” opportunity.
IAC, which has previously acquired, grown and then spun off businesses such as online travel agent Expedia, ANGI Homeservices and just last month, online dating giant Match.com, paid an estimated $1bn for its stake.
“With the separation of Match Group from IAC, and ‘new’ IAC emerging with $3.9bn of cash, no debt, and its opportunistic zeal intact, we are energized and excited to make this investment in MGM,” IAC chairman and senior executive Barry Diller said.
“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.”
Diller is a seasoned media executive, having produced films such as the Indiana Jones franchise, Beverly Hills Cop and Grease as chief executive of Paramount Pictures. Later, as chairman and CEO of 20th Century Fox, he launched the Fox broadcasting network, and greenlit shows including The Simpsons.
IAC chief executive Joey Levin added that the business would serve as a minority investor and long-term strategic partner to the operator.
“[We] would welcome the opportunity to contribute to MGM’s success in any way that MGM’s board would look favorably on our involvement,” Levin said.
In a letter to shareholders, Levin and Diller acknowledged that the investment was very different to that usually made by IAC.
“First, we accumulated a large minority position in a public company, which is not our usual methodology,” they wrote. “Second, the securities we purchased are common equity securities, the exact same securities that any investor with exactly $19 could buy and sell any day in the market.
“Third, we bought securities in a business that has relatively little to do with the Internet today. Fourth, we invested a portion of our cash in a new direction for IAC.”
However, they said the answer to all those questions was that MGM presented a “once in a decade” opportunity for IAC to acquire a stake in a leading brand with major potential for online expansion.
While Levin and Diller talked up the land-based business’ potential to recover from the novel coronavirus (Covid-19) shut-down, they said the online business had been the key motivator.
IAC had been exploring opportunities to enter the online gaming space for some time, they explained, but had been “generally unsatisfied” with the current landscape. The barriers to entry, such as land-based tethering requirements, and online penetration of less than 10%, meant that a physical presence was necessary to carve out a strong presence in the online betting and gaming market.
They said MGM had an iconic brand and multiple ways of monetizing intellectual property across different channels, as well as a “highly capable joint venture partner” in GVC Holdings, to help it deliver this.
“Although we would never ‘bet the company’, we know that this is a large bet for IAC,” Levin and Diller said in conclusion. “We have long been driven to look opportunistically for chances to build great interactive businesses and compound capital for our shareholders, and MGM has a rare but clear opportunity to deliver on that promise.”
MGM Resorts chair Paul Salem said the business “could not be more excited” to welcome IAC as an investor, adding that the business would be invited to nominate an appointment to the operator’s board.
Mr [Barry] Diller and Joey Levin, CEO of IAC, bring vast experience in both entertainment and online commerce and we will take full advantage of their experience,” Salem explained. “IAC’s family of brands and digital expertise are a great complement to the direction MGM Resorts has been taking both in leveraging our digital assets to enhance our guests’ experience and building a leading igaming and sports betting business in BetMGM.”
MGM president and CEO Bill Hornbuckle added that IAG’s expertise in growing online businesses made it “a natural fit” for the operator’s effort to enhance the resort experience as well as growing its online business.
“We appreciate that they share our long-term strategic vision for growth and maximizing value for our shareholders,” Hornbuckle said. “We welcome their collaboration and are excited at the possibilities it will bring.”