(Bloomberg) – The investment by IAC / InterActive Corp. $ 1 billion in casino operator MGM Resorts International shows that media mogul Barry Diller is still a top dealmaker.
IAC, a media and internet company with more than 150 brands and products, announced Monday that it had built a 12% stake in MGM just weeks after spinning off online dating giant Match Group Inc. “With the separation of Match Group from IAC, and the ‘new’ IAC with $ 3.9 billion in cash, no debt and opportunistic zeal intact. We are thrilled and excited to make this investment in MGM, “IAC chairman Diller said in a statement. News of the deal drove MGM Resorts shares up as much as 25%. IAC stocks were down about 2%.
One thing that Diller particularly attracted to MGM is an area that currently accounts for a tiny fraction of IAC’s revenue – online games. This market offers a $ 450 billion global opportunity with online penetration of less than 10%, according to the IAC.
In a letter to shareholders, Diller said investors might be surprised by the move. It is unusual for IAC to acquire a large stake in a public company that currently has relatively little internet connection.
This differs from the traditional IAC playbook: Buy small private online companies, roll up competitors, integrate the acquisitions and benefit from economies of scale. The company’s aggressive strategy has spawned titans like Expedia Group Inc., which Diller continues to lead as acting chairman despite being spun off by IAC in 2005. Four years later, IAC dropped HSN TV, Ticketmaster, Interval International, and Lending Tree. In July, IAC spun Match off, but only after it became the largest dating app provider in the world by sucking up more than 45 different online dating brands including Tinder, Hinge and OkCupid. “We have been restructuring this company for 20 years,” Diller said in a 2016 interview with Bloomberg TV.
The 78-year-old billionaire businessman who made his fortune as a Hollywood mogul has been busy this year. He took over the helm of Expedia after the board ousted the former CEO, led the earnings conference call with analysts in February and oversaw a downsizing that eliminated 3,000 employees before travel bans and bans led to an 85% drop in bookings . While Expedia went into crisis mode, IAC’s existing internet portfolio, which includes HomeAdvisor and the video app Vimeo, flourished as the virus brought more business to online platforms. And he ran the match spinoff.
Diller, who has been a die-hard dealmaker for more than two decades, sees opportunities in chaos. Instead of waiting for the pandemic to end before taking his next step, he instead rolled the dice for MGM Resorts with IAC’s largest investment since acquiring Ask Jeeves in 2005 for $ 1.85 billion.
“While we would never bet on the company, we know this is a big bet for IAC,” Diller and IAC chief executive officer Joey Levin wrote in the letter to shareholders. “IAC has always been opportunistic with its capital and if there ever was a time this moment is unique,” they said in the letter, adding that the deal represents a “once-in-a-lifetime opportunity” for IAC to invest in a large company Category with great potential to switch online.
MGM Resorts welcomed IAC as a “long-term strategic partner” and intended to invite them to join the company’s board of directors. “IAC’s expertise in growing and building brands online fits in perfectly with our focus on improving the resort experience through curated and personalized offerings, as well as digital enhancements in sports betting and online gaming,” said Bill Hornbuckle, CEO of MGM Resorts , in a statement. “We welcome your cooperation and look forward to the opportunities that arise from it.”
MGM, like other casino operators, was hit hard by the coronavirus, sparking a month-long shutdown of its properties in the United States and a sharp contraction in Macau. The company is able to weather the storm as it sold almost all of its resorts to investors under a sale-leaseback arrangement that released billions in cash. Even so, MGM has cut staff and given others leave as it does far less business due to the virus.
The company last month permanently passed his position as CEO to Hornbuckle, a veteran of the company who had been acting CEO since March. In a previous role as chief marketing officer, Hornbuckle led MGM’s loyalty program, which IAC identified as one of the enticing aspects of the company.
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