People Inc., which still owns about 27% of the casino operator, withdrew its $18 billion proposal to take MGM Resorts private. MGM fell about 10% on Thursday while Caesars Entertainment edged higher.
When Barry Diller offered to buy the rest of MGM Resorts International in June, his $48.30 a share was 10.6% above the stock's most recent close. On Thursday, a day after he withdrew it, MGM traded near $34.
That is roughly 22% below the roughly $43.70 at which the stock stood before the proposal. The market is not just removing the takeover premium. It is valuing the company well below where it was before a buyer showed up.
People Inc., the media company formerly known as IAC and MGM's largest shareholder, said late Wednesday it had withdrawn its non-binding proposal to acquire all the MGM shares it does not already own. "There are lots of ingredients that go into a proposal of this kind on its way to completion," said Diller, People's chairman. "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."
MGM shares fell about 10% on Thursday to roughly $34. Caesars Entertainment, a gaming peer, rose 0.3% to $29.60, which points to a deal-specific move rather than a sector one.
The June proposal had been built to look durable. The roughly $18 billion cash offer carried premiums of 24.1% to MGM's 30-day volume-weighted average price and more than 30% to its 90-day average. It had no financing condition, drawing instead on a mix of cash, debt and equity commitments. People, which then held about 26.1% of MGM, planned to own just over 50.1% of the company afterward, alongside minority investors.
Diller did not sound like someone leaving. People still holds 66.8 million MGM shares, about 27% of the company, a stake worth roughly $2.3 billion at Thursday's price. "What is undimmed is our belief in the future of MGM Resorts," he said. People has "total confidence in both the management and the Company's prospects," he added, and remains "open to and interested in the possibility of a strategic transaction with MGM Resorts and look forward to considering a range of alternatives." Diller sits on MGM's board, which said the company would continue as a standalone business.
The same release pointed to another use for People's money. Diller said its publishing business had posted its 11th straight quarter of growth "with plenty of cash to both invest in its business and purchase its stock."
That leaves investors with two readings of Thursday's drop. In the first, the market is correctly unwinding the value of a full cash buyout, since no revised offer, structure or timetable came with the withdrawal. In the second, a 27% holder with a board seat, a stated interest in "a range of alternatives" and a withdrawal phrased as "at this time" is a buyer on pause, and a stock 22% below its pre-offer level prices in more finality than People's own words support.
The next filing will help sort them out. Any amendment to People's ownership disclosures, a change in its 66.8 million share position or a proposal with a different structure would show whether the door is open or closed.