(Bloomberg) – The $ 1 billion investment in IAC / InterActive Corp. in casino operator MGM Resorts International proves that media mogul Barry Diller is still a top dealer.
IAC, a media and Internet company with more than 150 brands and products, announced Monday that it has built a 12% stake in MGM, just weeks after online dating behemoth Match Group Inc. played. “With the separation of Match Group from IAC, and ‘new’ IAC emerging with $ 3.9 billion in cash, no debt, and its opportunistic zeal intact, we are excited and excited to make this investment in MGM,” said Diller, chairman of IAC, in a statement.News on the deal caused shares of MGM Resorts to jump to 25% .IAC shares fell about 2%.
One thing that particularly draws Diller to MGM is an area that currently accounts for a small portion of IAC’s revenue – online gaming. That market represents a global opportunity of $ 450 billion, according to IAC, with less than 10% penetration online.
In a letter to shareholders, Diller said investors may be surprised by the move. It is unusual for IAC to buy a large stake in a public company that currently has relatively little to do with the Internet.
This is different from the traditional IAC gamebook: buying small private online businesses, rolling out competitors, integrating the acquisitions and reaping the benefits of scale. The company’s aggressive strategy has created titans such as Expedia Group Inc., of which Diller is still acting chairman, despite IAC spinning it in 2005. Four years later, IAC shook HSN TV, Ticketmaster, Interval International and Lending Tree. In July, IAC spun off from Match – but only after it grew into the largest app provider in the world by hovering over 45 different online dating brands, including Tinder, Hinge and OkCupid. “We’ve been restructuring this company for 20 years,” Diller said in an interview on Bloomberg TV back in 2016.
The 78-year-old billionaire businessman, who made his fortune as a Hollywood mogul, has been busy this year. He stepped in to take on the giant at Expedia after the board fired the former chief executive, led the corporate election call with analysts in February and oversaw a reduction in staff eliminating 3,000 employees before travel bans and lockdowns ensured bookings 85% tumble. While Expedia went into crisis mode, IAC’s existing portfolio of Internet companies, which includes HomeAdvisor and the video app Vimeo, flourished as the virus pushed more business to online platforms. And he presided over the spinoff of the Match.
Diller, who has been a dogled dealer for more than two decades, sees opportunity in chaos. Instead of waiting for pandemics to end before taking his next step, he has instead rolled the dice at MGM Resorts with the largest IAC investment since acquiring Ask Jeeves in 2005 for $ 1.85 billion.
“Although we never ‘bet’ the company, we know this is a big bet for IAC,” Diller and IAC Chief Executive Officer Joey Levin wrote in the letter to shareholders. “IAC has always been opportunistic with its capital, and if ever there was a time, this moment is unique,” they said in the letter, adding that the deal presents a “once in a decade opportunity” for IAC to investing in a large category with a great potential to move online.
MGM Resorts welcomed IAC as a “long-term strategic partner” and said it intended to invite them to join the company’s board. “IAC’s expertise in growing and expanding online markets is a natural fit for our focus on enhancing the resort experience through composite and personalized offerings, such as digital improvements in sports betting and online gaming,” said Bill Hornbuckle, CEO of MGM Resorts, in a statement. “We welcome their cooperation and are excited about the opportunities it will bring.”
MGM, like other casino operators, has been hit hard by the coronavirus, which has seen a months-long closure of its US properties and a severe contraction in Macau. The company is in a position to heat up the storm after it sold almost all of its resorts to investors in a sale-leaseback scheme that released billions in cash. However, MGM has cut staff and outperformed others as it deals with far fewer cases due to the virus.
The company last month gave its CEO position permanently to Hornbuckle, a company veteran who has been acting CEO since March. In a previous role as marketing manager, Hornbuckle spearheaded MGM’s customer loyalty program, which IAC cited as one of the company’s most attractive aspects.
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