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MGM Resorts (MGM) to Acquire The Cosmopolitan of Las Vegas
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MGM Resorts International (MGM - Free Report) recently entered into a definitive agreement with Blackstone to acquire the hotel operations of The Cosmopolitan of Las Vegas for $1.625 billion. However, the transaction is subject to regulatory approvals and is likely to close in the first half of 2022.
Earlier, the Cosmopolitan was acquired by Blackstone in 2014. Since then, it has gone through significant capital improvements which have generated a unique customer base and high-quality product offerings. Although the property faced pandemic-induced closures in-between, Blackstone revealed that the Cosmopolitan's performance in second-quarter 2021 exceeded pre-COVID levels.
Going by the purview, the transaction is likely to enable MGM Resorts to boost its presence and customer base in Las Vegas. Further, management believes that it can drive growth through leverage from MGM Resorts' expertise, operating platform and other achievable synergies.
Concerning the acquisition, MGM Resorts CEO & president Bill Hornbuckle, stated, "The Cosmopolitan brand is recognized around the world for its unique customer base and high-quality product and experiences, making it an ideal fit with our portfolio and furthering our vision to be the world's premier gaming entertainment company."
The company stated that it will enter into a 30-year lease agreement, including three 10-year renewal options, with a partnership among Stonepeak Partners, Cherng Family Trust and Blackstone Real Estate Income Trust, Inc. The partnership will acquire The Cosmopolitan's real estate assets. Per the agreement, MGM Resorts will pay an initial annual rent of $200 million, increasing annually at 2% for the first 15 years and the greater of 2% or the CPI increase (capped at 3%) thereafter. The deal is subject to closure of the transaction.
Price Performance
Image Source: Zacks Investment Research
Shares of MGM Resorts have appreciated 21.4% in the past six months against the industry’s decline of 12.2%. The company has been benefiting from sports-betting expansion, asset light strategy, non-gaming activities and digital initiatives. The company is confident regarding prospects in Macau and continues to invest in the same. Nevertheless, earnings estimates for 2021 have moved up in the past 60 days, depicting analysts’ optimism regarding the stock’s growth potential.
Some better-ranked stocks in the same space include Golden Entertainment, Inc. (GDEN - Free Report) , Boyd Gaming Corporation (BYD - Free Report) and Century Casinos, Inc. (CNTY - Free Report) . Golden Entertainment sports a Zacks Rank #1, while Boyd Gaming and Century Casinos carry a Zacks Rank #2 (Buy).
Golden Entertainment has a trailing four-quarter earnings surprise of 210.1%, on average.
Boyd Gaming has a three-five year earnings per share growth rate of 40.8%.
Century Casinos’ 2021 earnings are expected to surge 137.3%.
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MGM Resorts (MGM) to Acquire The Cosmopolitan of Las Vegas
MGM Resorts International (MGM - Free Report) recently entered into a definitive agreement with Blackstone to acquire the hotel operations of The Cosmopolitan of Las Vegas for $1.625 billion. However, the transaction is subject to regulatory approvals and is likely to close in the first half of 2022.
Earlier, the Cosmopolitan was acquired by Blackstone in 2014. Since then, it has gone through significant capital improvements which have generated a unique customer base and high-quality product offerings. Although the property faced pandemic-induced closures in-between, Blackstone revealed that the Cosmopolitan's performance in second-quarter 2021 exceeded pre-COVID levels.
Going by the purview, the transaction is likely to enable MGM Resorts to boost its presence and customer base in Las Vegas. Further, management believes that it can drive growth through leverage from MGM Resorts' expertise, operating platform and other achievable synergies.
Concerning the acquisition, MGM Resorts CEO & president Bill Hornbuckle, stated, "The Cosmopolitan brand is recognized around the world for its unique customer base and high-quality product and experiences, making it an ideal fit with our portfolio and furthering our vision to be the world's premier gaming entertainment company."
The company stated that it will enter into a 30-year lease agreement, including three 10-year renewal options, with a partnership among Stonepeak Partners, Cherng Family Trust and Blackstone Real Estate Income Trust, Inc. The partnership will acquire The Cosmopolitan's real estate assets. Per the agreement, MGM Resorts will pay an initial annual rent of $200 million, increasing annually at 2% for the first 15 years and the greater of 2% or the CPI increase (capped at 3%) thereafter. The deal is subject to closure of the transaction.
Price Performance
Shares of MGM Resorts have appreciated 21.4% in the past six months against the industry’s decline of 12.2%. The company has been benefiting from sports-betting expansion, asset light strategy, non-gaming activities and digital initiatives. The company is confident regarding prospects in Macau and continues to invest in the same. Nevertheless, earnings estimates for 2021 have moved up in the past 60 days, depicting 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 Golden Entertainment, Inc. (GDEN - Free Report) , Boyd Gaming Corporation (BYD - Free Report) and Century Casinos, Inc. (CNTY - Free Report) . Golden Entertainment sports a Zacks Rank #1, while Boyd Gaming and Century Casinos carry a Zacks Rank #2 (Buy).
Golden Entertainment has a trailing four-quarter earnings surprise of 210.1%, on average.
Boyd Gaming has a three-five year earnings per share growth rate of 40.8%.
Century Casinos’ 2021 earnings are expected to surge 137.3%.