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MGM Resorts (MGM) Boosts Financial Strength With 2 New Deals
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In a bid to strengthen its financial flexibility, MGM Resorts International (MGM - Free Report) announced two separate deals with Infinity World Development Corp and Blackstone. Following the announcements, shares of the company gained more than 2% during trading hours on Jul 1.
Firstly, MGM Resorts has entered into a definitive agreement with Infinity World Development Corp to acquire the remaining 50% stake in its JV — CityCenter Holdings, LLC. Quoted at $2.125 billion, the price reflects an implied valuation of $5.8 billion (based on net debt of $1.5 billion), after giving effect to the recently-closed sale of a two-acre parcel land. With this transaction, MGM Resorts will become the sole owner of the urban complex comprising Aria Resort and Casino as well as Vdara Hotel and Spa.
In this regard, Bill Hornbuckle, CEO and president of MGM Resorts, stated, "Uniting all of CityCenter under MGM Resorts' corporate structure and strategy will allow us to consolidate financial results, build on efforts to strengthen our operating model and guest experience and further our vision of becoming the world's premier gaming entertainment company."
Secondly, the company also entered into an agreement with Blackstone to monetize the Aria and Vdara real estate assets. Per the agreement, Blackstone will acquire Aria and Vdara real estate assets for $3.89 billion, following which the properties will be leased back to MGM Resorts for an annual rent of $215 million. However, this is subject to the closing of the equity purchase agreement between MGM Resorts and Infinity World.
The company stated that it continues to focus on its asset-light strategy as well as utilize the proceeds from its real estate transactions to enhance its financial flexibility and secure new growth opportunities. Furthermore, the closing of the Infinity World transaction is not contingent on the closing of the transaction with Blackstone. Nonetheless, the company expects to close the deals by third-quarter 2021.
Price Performance
Image Source: Zacks Investment Research
Coming to the price performance, shares of MGM Resorts have gained 38.1% so far this year compared with the industry’s 121.9% rally. The downside was primarily due to the temporary closure of certain properties, lower business volume as well as travel and operational restrictions due to the pandemic. Although casinos in Macau and Las Vegas properties are now open, the company is witnessing low visitation.
However, increased focus on sports betting expansion, asset light strategy, non-gaming activities and digital initiatives are likely to benefit the company in the upcoming periods. Also, the company is confident regarding prospects in Macau and continues to invest in the same. Nonetheless, earnings estimates for 2021 have improved in the past 30 days, mirroring analysts’ optimism regarding the stock’s growth potential.
Some better-ranked stocks in the same space include Red Rock Resorts, Inc. (RRR - Free Report) , Boyd Gaming Corporation (BYD - Free Report) and Century Casinos, Inc. (CNTY - Free Report) . Red Rock sports a Zacks Rank #1, while Boyd Gaming and Century Casinos carry a Zacks Rank #2 (Buy).
Red Rock has a trailing four-quarter earnings surprise of 166.2%, on average.
Boyd Gaming has a three-five year earnings per share growth rate of 19.8%.
Century Casinos 2021 earnings are expected to surge 119.9%.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
Image: Bigstock
MGM Resorts (MGM) Boosts Financial Strength With 2 New Deals
In a bid to strengthen its financial flexibility, MGM Resorts International (MGM - Free Report) announced two separate deals with Infinity World Development Corp and Blackstone. Following the announcements, shares of the company gained more than 2% during trading hours on Jul 1.
Firstly, MGM Resorts has entered into a definitive agreement with Infinity World Development Corp to acquire the remaining 50% stake in its JV — CityCenter Holdings, LLC. Quoted at $2.125 billion, the price reflects an implied valuation of $5.8 billion (based on net debt of $1.5 billion), after giving effect to the recently-closed sale of a two-acre parcel land. With this transaction, MGM Resorts will become the sole owner of the urban complex comprising Aria Resort and Casino as well as Vdara Hotel and Spa.
In this regard, Bill Hornbuckle, CEO and president of MGM Resorts, stated, "Uniting all of CityCenter under MGM Resorts' corporate structure and strategy will allow us to consolidate financial results, build on efforts to strengthen our operating model and guest experience and further our vision of becoming the world's premier gaming entertainment company."
Secondly, the company also entered into an agreement with Blackstone to monetize the Aria and Vdara real estate assets. Per the agreement, Blackstone will acquire Aria and Vdara real estate assets for $3.89 billion, following which the properties will be leased back to MGM Resorts for an annual rent of $215 million. However, this is subject to the closing of the equity purchase agreement between MGM Resorts and Infinity World.
The company stated that it continues to focus on its asset-light strategy as well as utilize the proceeds from its real estate transactions to enhance its financial flexibility and secure new growth opportunities. Furthermore, the closing of the Infinity World transaction is not contingent on the closing of the transaction with Blackstone. Nonetheless, the company expects to close the deals by third-quarter 2021.
Price Performance
Coming to the price performance, shares of MGM Resorts have gained 38.1% so far this year compared with the industry’s 121.9% rally. The downside was primarily due to the temporary closure of certain properties, lower business volume as well as travel and operational restrictions due to the pandemic. Although casinos in Macau and Las Vegas properties are now open, the company is witnessing low visitation.
However, increased focus on sports betting expansion, asset light strategy, non-gaming activities and digital initiatives are likely to benefit the company in the upcoming periods. Also, the company is confident regarding prospects in Macau and continues to invest in the same. Nonetheless, earnings estimates for 2021 have improved in the past 30 days, mirroring analysts’ optimism regarding the stock’s growth potential.
Zacks Rank & Key Picks
MGM Resorts currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same space include Red Rock Resorts, Inc. (RRR - Free Report) , Boyd Gaming Corporation (BYD - Free Report) and Century Casinos, Inc. (CNTY - Free Report) . Red Rock sports a Zacks Rank #1, while Boyd Gaming and Century Casinos carry a Zacks Rank #2 (Buy).
Red Rock has a trailing four-quarter earnings surprise of 166.2%, on average.
Boyd Gaming has a three-five year earnings per share growth rate of 19.8%.
Century Casinos 2021 earnings are expected to surge 119.9%.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>