MGM Resorts International (NYSE: MGM) amended its voting agreement with Barry Diller's People Inc. (NASDAQ: PPLI) on Wednesday, Casino.org reported.
The change could let Diller back a takeover of the casino operator by another bidder.
If a change-of-control deal arises, People, Diller and associated entities must now vote their MGM shares as the board recommends, subject to certain conditions.
Reuters reported that MGM made the amendment after People withdrew its proposal to acquire the company.
MGM said the agreement commits neither side to a transaction and that no deal is under consideration. Casino.org noted that MGM did not say it is in takeover talks with another suitor.
What the Amended Agreement Says
The group's combined stake in MGM is capped at 29.9%. No further share purchases are allowed beyond that point.
People currently owns about 27% of MGM, CNBC reported, making it the largest shareholder.
Casino.org said the stake began at 12% in August 2020 and grew through additional purchases and MGM's share buybacks.
MGM, for its part, agreed not to take defensive measures or actions designed to be adverse to People and its affiliates. That holds as long as they comply with the agreement.
According to Casino.org, MGM has not elaborated on what defensive measures could include.
MGM board chairman Paul Salem said in the company's press release that the pact gives directors flexibility. "This agreement provides the Board with a clear path to maximize value through share repurchases and a change of control transaction, if applicable, in accordance with the Board’s fiduciary duties," Salem said, as Casino.org reported.
Diller sits on the MGM board as a director.
How the Earlier Bid Ended
People had offered $48.30 per share in June, a proposal valued at more than $18 billion. It withdrew the offer in September.
The earlier voting agreement, struck in April, had limited the group's voting influence.
After the bid, Diller signalled that People would not support another third-party offer for MGM, Casino.org reported. The new terms change that position.
When People pulled its proposal, Diller said the "mix" of factors needed to complete a deal had not come together, CNBC reported.
He added that People remained interested in a possible strategic transaction with MGM. Then the Wall Street Journal reported that MGM was exploring an offer.
MGM chief executive Bill Hornbuckle declined to rule out MGM buying People.
He said MGM would keep pursuing what is best for shareholders and is trying to unlock the value of a company that it thinks is grossly undervalued, he told CNBC at the Global Gaming Expo.
MGM shares traded near $32 around that time, well below People's offer price. The stock is down 22.6% so far this year, Casino.org reported.
The Wider Deal Picture
The People proposal surfaced while other casino groups were changing hands.
Caesars Entertainment shareholders approved a $17.6 billion sale, including assumed debt, to Fertitta Entertainment, News 3 (KSNV) reported. Regulators are watching.
CNBC said the Federal Trade Commission is conducting an extended antitrust review of that deal and has issued a second request for information.
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