IAC announced Monday that it has acquired a 12% stake in MGM Resorts International – and that online gaming has piqued IAC's interest in getting involved in a company that is outside of its normal interests.
IAC / InterActive Corp has spent approximately $ 1 billion to purchase a minority stake in listed MGM Resorts. The company recently took steps to increase its share of the sports betting market and strengthen its relationships with major sports leagues through its sports betting brand BetMGM.
For example, BetMGM and the PGA Tour announced last week that they had signed a multi-year contract for sports betting content and marketing. In 2019, MGM became the first official sports betting partner for Major League Soccer, and MGM has signed multiple contracts with individual teams in major North American sports leagues.
"What drew us to MGM in the beginning was, in addition to its leadership roles in leisure, hospitality and gaming, an area that currently accounts for a tiny fraction of its revenue – online gaming," said Barry Diller, IAC chairman and senior executive, in one Company press release. "IAC's fundamental concept of looking for ways to build interactive businesses is our rationale. In MGM Resorts' already impressive offline businesses, there is a digital first opportunity. With our experience, we hope we can make a strong contribution to growth of online games. "
MGM shares rose 22% after the announcement, and IAC shares rose 1.4% in early trading on Monday. Bloomberg.com reported.
BetMGM currently has physical or online sports betting in Colorado, Indiana, Michigan, Mississippi, Nevada, New Jersey, and West Virginia. Other states are in preparation. And MGM Resorts signed a deal with Yahoo last year to provide the internet giant with sports betting.
For its sports betting in Indiana, BetMGM has partnered with Belterra Casino in Florence, about 50 miles from Cincinnati, to open its mobile betting app. The app has found a niche there, ranking third of eight online betting options in the state for sports betting in July at $ 3.5 million (albeit a fair bit behind market leaders DraftKings and FanDuel), according to the Indiana Gaming Commission on Published Monday.
MGM Resorts International recently reported a 91% decrease in consolidated net sales in the second quarter compared to the second quarter of 2019. This decrease is mainly due to the closings of brick and mortar casinos due to the coronavirus pandemic. After closing in mid-March, MGM resorts reopened on May 25 when the Mississippi Gold Strike Tunica reopened. But even if most of the casinos have reopened, they have reduced capacity.
What sparked IAC's interest in MGM
A letter to IAC shareholders read in part, "We believe MGM presented a unique opportunity for IAC to own a meaningful piece of an outstanding brand in a large category with great potential for online relocation." In the letter it was also pointed out that "we have invested some of our money in a new direction for IAC".
IAC, headquartered in New York, owns 10 companies operating multiple brands including Vimeo, Ask.com, Dotdash, Angie's List, Investopedia, and Care.com. In its letter to shareholders, IAC expressed confidence that, assuming business returns to pre-coronavirus levels, MGM will perform as well after the pandemic as it did before the pandemic, attracting visitors to over 35% of the available areas the Las Vegas Strip to operate rooms as well as eight regional properties in the US, two in Macau and hopefully in Japan. "
The letter also states that IAC was keen to get into the online gaming market but was looking for the right opportunity.