Casino owner Vici Properties buys MGM Growth Properties for $17.2 billion

  • VICI Properties buys MGM Growth Properties for $17.2 billion.
  • The deal adds 15 properties from MGM Resorts.
  • Upon closure, VICI's will have an estimated market cap of $45 billion and will likely be the biggest landowner on the Las Vegas Strip.

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Real estate investment trust Vici Properties is acquiring MGM Growth Properties in a $17.2 billion deal that will likely make the casino owner the largest landowner on the Las Vegas Strip.

MGM Resorts International, which owns the majority stake in MGM Growth Properties, will receive about $4.4 billion in cash in the deal. The transaction includes $5.7 billion in debt.

MGM Resorts has been selling off its real estate assets in recent years, and it spun off MGM Growth Properties in 2016. Its portfolio includes Mandalay Bay and the MGM Grand Las Vegas.

All together, Vici will gain 15 entertainment properties in the deal, significantly expanding its geographic footprint, but keeping its focus on the casino industry.

"We're acquiring what we believe is the best-in-class experiential real estate portfolio in America. These are magnificent assets," said Vici's Chief Executive Edward Pitoniak in an interview.

When Vici was created to help Caesars emerge from bankruptcy, it had only one tenant: Caesars. It's been a mission to broaden its holdings, recently announcing a deal to buy the Venetian, Palazzo and Sands Expo and Convention Center for $4 billion.

With Vici's bigger portfolio, Caesars goes from contributing 100% of Vici's revenue to 41%. The deal will also give the company an estimated enterprise value of $45 billion, which is far larger than any of its tenants.

"The deal … has far reaching implications … both within the gaming REIT space and for MGM, who will now be equipped with even more cash on the balance sheet to put towards ROI endeavors," said Deutsche Bank analyst Carlo Santerelli in a research note.

MGM Resorts also touted the financial flexibility the deal will provide.

"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," said Bill Hornbuckle, chief executive and president of MGM Resorts, in a news release.

MGM Growth Properties shareholders will swap each Class A share for $43 in newly issued Vici stock, or a premium of 16% from MGM Growth's closing price on Tuesday.

On Wednesday, MGM Growth shares rose 6.8% to close at $39.61. MGM Resorts shares inched up 0.9% to close at $37.27, while Vici shares fell 0.3% to $30.18.

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