GGRAsia – Nomura ‘seriously doubts’ MGM-Caesars tie-up on cards

Nomura ‘seriously doubts’ MGM-Caesars tie-up on cards

Nov 06, 2018 Newsdesk Latest News, Top of the deck, World

The stockbroking arm of Japanese financial institution Nomura has played down a New York Post story that said MGM Resorts International was interested in merging with fellow U.S.-based casino operator Caesars Entertainment Corp, and had hired bank group Morgan Stanley to study whether it was feasible.

A Nomura note on Monday said: “We seriously doubt that, even if there are such discussions, they will go anywhere.”

MGM Resorts has a presence in the Macau casino market via a majority stake in MGM China Holdings Ltd. The Caesars brand has long coveted a presence in Asia in order to make money from the region’s avid gamblers: it is currently planning a foreigner-only casino in South Korea which might open in 2021.

MGM Resorts and Caesars Entertainment are already competing for consumer dollars in the increasingly-crowded – in terms of venues – U.S. market. The Caesars group is seeking a Japan casino licence, as is MGM Resorts, although the latter has said publicly it would prefer a majority stake if possible.

The rival groups have each spun off a real estate investment trust (REIT) to manage and produce fresh yield from the large amounts of infrastructure they respectively have created in the U.S. In January it emerged that Caesars’ REIT had rejected a takeover proposal from MGM Resorts’ REIT, MGM Growth Properties LLC.

The New York Post reported on Monday that MGM Resorts had hired Morgan Stanley and lawyers Weil, Gotshal and Manges to start studying the idea of a tie-up with Caesars Entertainment. The newspaper, citing unidentified sources “close to the situation”, said there was no offer on the table.

The report quoted its sources as saying activist hedge funds, which together owned about a 25-percent portion of underperforming Caesars Entertainment, had been pushing for an MGM Resorts deal.

MGM and Caesars Entertainment declined to comment, the New York Post said. Neither the stock of MGM Resorts – listed on the main New York Exchange – nor the shares of Caesars Entertainment, listed on Nasdaq, received any boost from the newspaper report. MGM Resorts fell 1.95 percent by Monday’s close, while Caesars Entertainment was down 0.31 percent.

The New York Post said that, failing any bid from MGM Resorts, then either U.S.-based Wynn Resorts Ltd – parent of Macau operator Wynn Macau Ltd – or Genting Bhd of Malaysia – parent of casino operators Genting Singapore Ltd, Genting Malaysia Bhd and Genting Hong Kong Ltd – might be interested in buying Caesars Entertainment.

The Nomura note commented: “We also find it a dubious proposition that either Wynn Resorts or Genting is in a position to acquire Caesars Entertainment.

“We reiterate our positive view on Caesars Entertainment, which is based not on a takeover premium but on improving operational performance with a new CEO, as well as stronger demand trends in Vegas next year.”

Last week it was announced that Caesars Entertainment’s current chief executive, Mark Frissora, would leave his post in February, after a tenure that included seeing the group through a lengthy bankruptcy reorganisation, completed last year.