MGM's real estate trust sold to Vici for $17.2B as the brand seeks to become "asset light”

VICI Properties announced the strategic acquisition of MGM Growth, including MGM Resorts International’s stake in the real estate investment trust, for total consideration of $17.2 billion, inclusive of the assumption of approximately $5.7 billion of debt.

The agreement was revealed by both parties on August 4 and is expected that, upon completion of the merger, VICI will have an estimated enterprise value of $45 billion, creating America’s largest owner of experiential real estate, describes the company.

VICI will redeem a majority of the MGM Growth operating partnership units held by MGM Resorts for a fixed exchange ratio price of $43 each. The rest will be acquired in a stock-for-stock transaction.

The deal is part of MGM Resorts’ efforts “to become asset light,” CEO Bill Hornbuckle said in a statement. “We are well positioned and remain focused on pursuing growth opportunities in our core business, with significant financial flexibility to continue to deploy capital to maximize shareholder value.”

The acquisition was approved by the Board of Directors of each of MGM Resorts, MGP and VICI Properties. It is expected that the transaction will be closed in the first half of 2022. The VICI Properties Board of Directors and management team will remain unchanged.

“Through this transformative strategic acquisition, we are merging MGP’s best-in-class portfolio into VICI’s best-in-class management and governance platform, creating the premier gaming, entertainment and leisure REIT in America,” said Ed Pitoniak, CEO of VICI Properties.

According to the company, the transaction will enhance portfolio quality, size and scale at significant discount to replacement cost, including the addition of 15 Class A entertainment resort properties. It will also diversify VICI’s tenant base and, upon closing, the company’s top tenant concentration will be reduced to ~41% (from 84% currently).

Other merits found in the acquisition for VICI include an strengthened ability to fund accretive growth, amplified index demand and trading liquidity, and immediately accretive to AFFO per share.

This follows other important deals carried out by VICI this year, including the announcement in March that the company would acquire the Venetian Resort’s real estate on the Strip in Las Vegas for $4 billion.

“After many years of growing both of our portfolios, combining them into one company will generate the best results for the shareholders of both companies,” said James Stewart, CEO of MGP. “The combined company will create a superior platform for delivering exceptional returns to MGP’s existing shareholders, by improving diversification, increasing scale, lowering cost of capital and benefiting from future growth.”

“This transaction unlocks the significant real estate value of our assets, enhances our financial flexibility and strengthens our ability to execute key growth initiatives. We look forward to our long-term partnership with VICI,” added Hornbuckle.