Kirk Kerkorian was a gambling industry icon, having founded what would ultimately become the casino empire known as MGM Resorts. He died just over four years ago at 98 years of age and, when he passed, his will stipulated that the 16.2% stake he maintained in the company be sold. That has continued to happen over the years, with the final shares just being released by the holding company.
MGM announced yesterday that Tracinda Corp., Kerkorian’s holding company, had sold the last 27.2 million shares, about 4.8% of MGM. Given that MGM’s price has gone from $19.43 at the time of the pioneer’s death to $29.69 as of yesterday, the payout was certainly more than just a little substantial. No details were given regarding who purchased the shares, but the money will go to a trust that was established by Kerkorian for his two daughters.
The chairman and CEO of MGM, Jim Murren, took a few minutes to comment on Kerkorian’s legacy, stating, “I believe that Mr. Kerkorian would have been proud of MGM’s achievements and of what the company has become. I strive every day to honor his legacy, live his values, and ensure that this company remains at the core, the kind of company he was proud to have founded.”
The closure of Kerkorian’s ties to MGM happens at a time that the company is reportedly talking about selling some of its assets. Bloomberg discusses rumors that MGM has been talking to the private equity firm Blackstone Group about selling the MGM Grand and the Bellagio, both on the Las Vegas Strip, and then leasing them back from the company.
Apparently, taking the two properties out of its internal portfolio would generate around $5-6 billion for MGM after it settles any associated tax responsibilities. While there has been no confirmation that a deal is in the works, there appears to be more substance to the story than just simple conjecture and Bloomberg indicates that “people with knowledge of the matter” confirmed the reports.
Before the rumors started circulating this week (there had been talk by MGM a few months ago, but nothing specific), Chad Beynon of Macquarie stated, “On real estate, MGM can still monetize several assets at attractive cap rates, in our view.” Along with that, the analyst increased his price target for MGM from $34 to $35.
Selling the two Strip properties would give Murren’s MGM 2020 economic vision a huge boost. It would be a great way to reduce debt and give the company greater flexibility moving forward. If any deal were to come to fruition, MGM would most likely still keep Circus Circus and CityCenter in its portfolio.