VICI Properties Acquires MGM Growth Properties For $17.2B

MGM Resorts International MGM announced Wednesday an agreement with the real estate investment trust VICI Properties Inc. VICI and MGM Growth Properties LLC MGP in which VICI will acquire MGP for $17.2 billion, including the assumption of $5.7 billion in debt.

What Happened: Under the terms of the agreement, VICI will redeem a majority of MGP operating partnership units held by MGM Resorts for $43 per unit — approximately $4.4 billion in cash — and acquire 100% of the outstanding class A shares of MGP in a stock-for-stock transaction.

Furthermore, VICI will sign an amended and restated 25-year triple-net master lease with MGM Resorts, with an initial total annual rent of $860 million that includes MGP’s pending acquisition of the MGM Springfield casino resort in Massachusetts. VICI will also retain MGP’s 50.1% ownership stake in a joint venture with Blackstone Real Estate Income Trust, which owns the real estate assets of MGM Grand Las Vegas and Mandalay Bay, also in Las Vegas.

MGM Resorts will also gain ownership of an approximate 1% stake in the VICI operating partnership, worth roughly $370 million.

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Why It Happened: Bill Hornbuckle, president and CEO of MGM Resorts, said the transaction is the culmination of the company’s five-year effort “to become asset light” while streamlining its structure.

“As a result of these actions, we are well positioned and remain focused on pursuing growth opportunities in our core business, with significant financial flexibility to continue to deploy capital to maximize shareholder value,” he said.

“Since our IPO in 2016, MGP completed over $7 billion of real estate transactions that grew our portfolio of premier entertainment assets, including introducing innovative transaction structures to the gaming REIT universe,” said James Stewart, CEO of MGP. “As a result of our completed and announced transactions, MGP's pro rata rental revenue has nearly doubled from $550 million at IPO to approximately $1.0 billion, our annualized dividends per share increased 44%, and our total shareholder return has more than doubled.

“Following the strategic merger with VICI, MGP shareholders will benefit from the collective strengths of both companies,” Stewart added.

Price Action: MGM Growth Properties' shares are trading higher by 9% near $41 at publication time.

Photo: MGM Grand Las Vegas, courtesy of J. Donohoe / Flickr Creative Commons.