Real estate investment trust Vici Properties acquires MGM Growth Properties in a $17.2 billion deal that will likely make the casino owner the largest landowner on the Las Vegas Strip.
MGM Resorts International, which owns the majority stake in MGM Growth Properties, will receive approximately $4.4 billion in cash in the deal. The transaction involves $5.7 billion in debt.
MGM Resorts has sold its real estate assets in recent years and spun off MGM Growth Properties in 2016. The portfolio includes Mandalay Bay and the MGM Grand Las Vegas.
All told, Vici will get 15 entertainment properties in the deal, significantly expanding its geographic footprint, but maintaining its focus on the casino industry.
“We are acquiring what we believe to be the best-in-class experiential real estate portfolio in America. These are wonderful assets,” said Vici’s Chief Executive Edward Pitoniak in an interview.
When Vici was founded to help Caesars out of bankruptcy, it had only one tenant: Caesars. It was on a mission to expand its holdings, and recently announced a deal to buy the Venetian, Palazzo and Sands Expo and Convention Center for $4 billion.
With Vici’s larger portfolio, Caesars goes from 100% of Vici’s revenue to 41%. The deal also gives the company an estimated business value of $45 billion, which is far greater than all of its tenants.
“The deal…has far-reaching implications…both within the gaming REIT space and for MGM, which will now be equipped with even more cash on the balance sheet to invest in ROI efforts,” said Carlo Santerelli, an analyst at Deutsche Bank. a research note.
MGM Resorts also praised the financial flexibility the deal will provide.
“As a result of these actions, we are well positioned and remain focused on pursuing growth opportunities in our core businesses, with significant financial flexibility to continue deploying capital to maximize shareholder value,” said Bill Hornbuckle, CEO and president of MGM Resorts. , in a press release.
MGM Growth Properties shareholders will exchange each Class A share for $43 in newly issued Vici shares, or a 16% premium from MGM Growth’s closing price on Tuesday.
On Wednesday, MGM Growth stock rose 6.8% to $39.61. Shares of MGM Resorts rose 0.9% to $37.27, while Vici shares fell 0.3% to $30.18.