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Is MGM Headed For A Proxy Fight?

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Is MGM Headed For A Proxy Fight?
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Three days after hedge fund Land and Buildings released a detailed report on MGM Resorts International (NYSE: MGM) advising the company to consider spinning off its casino properties into a real estate investment trust (REIT), the fund issued a follow-up statement to MGM shareholders.

Since MGM seems to be unwilling to engage with Land and Buildings regarding the fund's proposal, the company could soon have a proxy battle on its hands.

The Proposal

In its original report on Tuesday, Land and Buildings suggested that MGM shares are undervalued by at least 70 percent and that opco/propco restructuring would unlock the full value of the company's real estate.

As part of the proposal, the fund named four nominees for MGM's board of directors and urged the company to actively pursue their restructuring plan.

Related Link: Morgan Stanley's 'Realistic REIT Bull Case' For MGM

MGM's Response

On Friday, MGM released its annual proxy statement and rejected all of Land and Buildings' board nominees. MGM also expressed confidence in the company's current board members.

"The board, as it is currently constructed, is very effective, independent, and diverse and has a broad range of expertise," MGM said in the filing.

"The Land and Buildings proposals include concepts that the board and management have previously analyzed… The company will continue to review opportunities in keeping with its commitment to identify long- term strategies to enhance shareholder value."

Land And Buildings Fires Back

In its own statement on Friday, Land and Buildings said they are discouraged by MGM's decision not to engage.

Land and Buildings believes that MGM shareholders are on the hedge fund's side after the stock spiked more than 10.6 percent Tuesday when the fund released its proposal.

MGM stock fell more than 1.0 percent on Friday when MGM rejected Land and Buildings' board nominees.

What's Next?

In its statement, Land and Buildings expressed its continued willingness to work with current MGM management.

"Our hope remains that we can work collaboratively with the Board and management of MGM to reach a mutually beneficial path forward," they said in the statement.

If MGM continues to dismiss the restructuring proposal, it may soon end up in the middle of a proxy fight.

"We believe that the voice of the shareholders must be heard," Land and Buildings said, "and as a result we have no choice other than to file our own proxy statement in the near future."

Image credit: Public Domain

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