Market Overview

Deutsche Bank Analysts Had Lunch MGM's Activist; Here's What Happened


In a report published Thursday, Deutsche Bank analyst Carlo Santarelli detailed a meeting he had with the team from Land & Buildings, an activist investor that is pushing for an REIT and C-Corp structure change at MGM Resorts International (NYSE: MGM).

According to Santarelli, the proposed transaction has a "low probability" of being implemented but the company can take easier and "considerably less dramatic" steps that are consistent with Land & Buildings proposals to unlock shareholder value. Some of the proposals include outright asset sales, greater cost disciplines, deleverage the balance sheet and consolidating or deconsolidating ownership of certain assets.

"In short, while we continue to view the REIT spin option, as proposed, as a long shot, we do believe the proposal has several strong arguments and believe a singles and doubles approach likely has as much value unlocking potential as the original big swing REIT proposal," Santarelli wrote.

Related Link: MGM Proxy Battle? Latest Letter From Land & Buildings

The analyst continued that he views the MGM domestic story "favorably" and believe investor focus, upon Macau stability, will shift to an "advantaged geographic skew" relative to its competitors, resulting in outperformance.

Finally, Santarelli noted that MGM's Board has 11 members while Land & Buildings has proposed four of its own for election. Since all 11 seats are up for re-election, the activist fund will identify the four members of the Board it will target for removal in the coming weeks.

Shares remain Buy rated with an unchanged $29 price target.

Latest Ratings for MGM

Jan 2021KeyBancInitiates Coverage OnSector Weight
Oct 2020Roth CapitalMaintainsNeutral
Oct 2020BarclaysDowngradesEqual-WeightUnderweight

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