MGM amends voting pact with People, setting 29.9% ownership cap

MGM Resorts International and People Inc. have amended the voting agreement between them, MGM said. Under the revised terms, People, Barry Diller and certain associated persons, described as the covered entities, have agreed to vote all their MGM Resorts shares in line with the board's recommendation on a change-of-control transaction, subject to conditions. The covered entities have also agreed not to buy additional MGM Resorts shares if doing so would take their combined holding above 29.9% of the company's outstanding shares.

According to MGM, the casino company will refrain from adopting measures or actions that work against the covered entities for as long as those parties stay compliant with the pact. MGM gave no detail on which steps might count as adverse to People. The company also stated that neither side is bound to pursue a deal, and that no such deal is under consideration. MGM stopped short of confirming any takeover discussions with a rival bidder.

The revised pact arrived roughly one month after People abandoned its $18 billion offer for MGM, which owns the Bellagio. An April agreement had capped the voting power of Diller and other covered entities at the gaming company. After People made its bid, Diller indicated the media group would not back a rival offer for MGM, a position the fresh agreement changes.

People, previously known as IAC/InterActiveCorp, began building its MGM position in August 2020, when it controlled 12% of the company. Through additions to that stake and MGM's share buybacks, People now owns more than 26% of MGM equity and is the largest MGM shareholder. MGM's stock is down 22.6% year to date.

Paul Salem, who chairs the MGM Resorts board, described the arrangement as giving directors an unambiguous route to enhance value, whether by buying back stock or through a change-of-control deal where one applies, consistent with their fiduciary duties. Salem added that MGM appreciates both People, its biggest investor, and Barry Diller, who sits on the MGM Resorts board, and expects each to keep contributing to value creation for every shareholder.