With MGM looking to bid on Caesars' Vici properties (including Caesars and Harrah's on the Las Vegas Strip), is Las Vegas becoming more and more of a one-prominent-casino town?
Yes and no.
MGM Resorts International’s real estate investment trust, MGM Growth Properties would — if the deal were sweetened to Vici Properties’ liking — own the physical assets of Caesars Palace and Harrah’s Las Vegas. However, they would both continue to be managed by Caesars Entertainment, which would keep the revenue and pay rent to MGP.
Surprisingly, the deal would not require Nevada regulatory scrutiny, according to Nevada Gaming Commission Chairman Dr. Tony Alamo. “No regulatory oversight or approval is required if this is a straight-ahead real estate REIT purchase,” he told the Las Vegas Sun.
Added Fitch Ratings analyst Alex Bumazhny, “There should not be any conflicts of interests in theory. Caesars’ leases, and other agreements such as the right of first refusal on certain assets, should dictate the nature of the relationship between Caesars and VICI or MGP.”
Given this regulatory situation, it’s unlikely the deal would have to pass Federal Trade Commission scrutiny, even in Atlantic City, where MGM-owned Borgata would be joined by (presently) Caesars-owned Bally’s Atlantic City and Caesars Atlantic City. The question of whether that would constitute an excessive concentration of market share is probably moot for the same reasons that it would be on the Strip. The assets that MGP would add to its portfolio are predominantly regional: 1) Harrah’s-branded casinos in Lake Tahoe, Council Bluffs, Iowa, North Kansas City, Missouri, Joliet and Metropolis, Illinois, and Biloxi; 2) Horseshoe Hammond, Horseshoe Southern Indiana, Horseshoe Bossier City, and Horseshoe Tunica; Tunica Roadhouse, Louisiana Downs, Bluegrass Downs and several golf courses.
Another if is whether MGP is willing to come back with a higher offer. MGM approached Vici Properties (Caesars’ REIT) with $19.50 a share at a time when Vici was trading at $20.20. The MGM lion also seems to have mistimed its leap, not waiting for the bulk of Vici’s initial public offering to hit the market. You don’t need 20/20 vision to see why that tender was rejected. Should MGM be willing to pay a substantial premium to Vici’s share price, stockholder pressure would cause Vici management to reconsider, at least. Another if is other casino companies coming into the picture with higher offers than MGM’s.
However, a Vici-engorged MGM would be able to set prices on most of the Las Vegas Strip. It would command Caesars’ 5,556 hotel rooms, along with its own 38,167 hotel rooms, not to mention a plethora of restaurants, spas and nightclubs.
Stay tuned. We’ve not heard the last of this story.
