(Bloomberg) — IAC/InterActive Corp.’s $1 billion investment in casino operator MGM Resorts International demonstrates media mogul Barry Diller is still a top dealmaker.
IAC, a media and internet company with more than 150 brands and products, announced Monday that it built a 12% stake in MGM, just weeks after it spun off online dating behemoth Match Group Inc. “With the separation of Match Group from IAC, and ‘new’ IAC emerging with $3.9 billion of cash, no debt, and its opportunistic zeal intact, we are energized and excited to make this investment in MGM,” Diller, IAC’s chairman, said in a statement. News of the deal caused MGM Resorts shares to jump as much as 25%. IAC shares declined about 2%.
One thing that attracted Diller to MGM in particular is an area that currently comprises a tiny portion of IAC’s revenue — online gaming. That market represents a $450 billion global opportunity, according to IAC, with less than 10% penetration online.
In a letter to shareholders, Diller said investors might be surprised by the move. It’s unusual for IAC to purchase a large stake in a public company that currently has relatively little to do with the internet.
This veers from IAC’s traditional playbook: buy up small private online companies, roll up competitors, integrate the acquisitions and reap the rewards of scale. The company’s aggressive strategy has created titans like Expedia Group Inc., which Diller still heads as acting chairman despite IAC spinning it off back in 2005. Four years later, IAC shed HSN TV, Ticketmaster, Interval International and Lending Tree. In July, IAC spun off Match — but only after it had grown into the biggest dating app provider in the world by hoovering up more than 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 the reins at Expedia after the board ousted the former chief executive officer, led the company’s earnings conference call with analysts in February and oversaw a staff reduction that eliminated 3,000 workers before travel bans and lockdowns caused bookings to tumble 85%. 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 Match spinoff.
Diller, who has been a dogged dealmaker for more than two decades, sees opportunity in chaos. Rather than waiting for pandemic to end before making his next move, he has instead rolled the dice on MGM Resorts with IAC’s biggest investment since acquiring Ask Jeeves in 2005 for $1.85 billion.
“Although we would never ‘bet the company,’ we know that this is a large 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 invest in a large category with a great potential to shift online.
MGM Resorts welcomed IAC as a “long-term strategic partner” and said it intended to invite them to join the company’s board of directors. “IAC’s expertise in growing and expanding brands online is a natural fit for our focus on enhancing the resort experience through curated and personalized offerings, as well as digital enhancements in sports betting and online gaming,” MGM Resorts CEO Bill Hornbuckle said in a statement. “We welcome their collaboration and are excited at the possibilities it will bring.”
MGM, like other casino operators, has been hit hard by the coronavirus, which triggered a months-long closing of its properties in the U.S. and a severe contraction in Macau. The company is in a position to weather the storm, having sold nearly all of its resorts to investors in a sale-leaseback arrangement that freed up billions in cash. Still, MGM has cut staff and furloughed others as it copes with far less business due to the virus.
The company last month gave its CEO position permanently to Hornbuckle, a company veteran who had been acting CEO since March. In a previous role, as marketing chief, Hornbuckle spearheaded MGM’s customer-loyalty program, which IAC cited as one of the enticing aspects of the company.
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