MGM Resorts International (MGM - Free Report) and MGM Growth Properties LLC (MGP - Free Report) have reached an agreement to buy Empire City Casino's race track and casino. If Empire City gets a license for live table games on or before Dec 31, 2022 and MGM Resorts accepts it by Dec 31, 2024, then the latter will pay an additional amount of $50 million to the former. Valued at $850 million, the deal is expected to close in first-quarter 2019.
On completion of the deal, MGP will acquire the developed real property related to Empire City from MGM Resorts and will lease it to a subsidiary of the same. MGM Resorts subsidiary will control the property. The deal will help the company solidify its position on the East Coast. Over the past two years, MGM Resorts has been constantly increasing its presence on the East Coast.
MGM Resorts said that “With Empire City's approximately 40 percent share of gross gaming revenues in the market, we believe there are significant opportunities for MGM Resorts to further drive growth.” The company expects the deal to be value assertive within the first year of closing. In 2017, Empire City recorded net revenues of nearly $230 million and $70 million in adjusted EBITDA.
We believe this latest buyout will be a major growth driver for the company. This is because Empire City Casino not only has 5,200 slots and electronic table games but also offers live and simulcast horse racing, besides numerous dining outlets.
Furthermore, the company might start offering sports betting in the near term as the Supreme Court has overturned the Professional and Amateur Sports Protection Act (PASPA) that banned sports betting outside Nevada. In fact, the court ruling has opened the door for other states to enter sports betting business. MGM Resorts had said that “We have already established the architecture to deploy sports betting as soon as the states allow us to do that.”
Following the news, not much movement was witnessed in the stock price. However, this Zacks Rank #4 (Sell) company has lost 8% against the industry’s increase of 2.5% in the past six months.
Stocks such as Boyd Gaming Corporation (BYD - Free Report) , Melco Resorts & Entertainment Limited (MLCO - Free Report) and Penn National Gaming, Inc. (PENN - Free Report) have gained 16.4%, 19.6% and 18.5%, respectively, in the past six months.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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