(Bloomberg) – $ 1 billion investment by IAC / InterActive Corp. at casino operator MGM Resorts International demonstrates media mogul Barry Diller is still a top seller.
The IAC, a media and internet company with more than 150 brands and products, announced Monday that it was building a 12% stake in MGM, just weeks after the behemoth online meeting Match Group Inc. was interrupted. “With the separation of the Match Group from the IAC, and the new ‘IAC’ emerging with $ 3.9 billion in debt-free and its untapped opportunistic zeal, we are energized and excited to make this investment in MGM,” he said. Diller, President of the IAC, in a statement. News of the deal caused MGM Resorts shares to drop as much as 25%. IAC shares fell about 2%.
One thing that attracted Diller to MGM in particular is an area that currently includes a small portion of IAC revenue – online gaming. This market represents a $ 450 billion global opportunity, according to the IAC, with less than 10% Internet penetration.
In a letter to shareholders, Diller said investors may be surprised by the move. It was unusual for the IAC to buy a large stake in a public company that currently has relatively little internet connection.
It all depends on the traditional IAC book: buy small private companies online, grab competitors, integrate purchases, and reap scale rewards. The company’s aggressive strategy has created titans like Expedia Group Inc., of which Diller continues to be chairman, despite the IAC turning it back on 2005. Four years later, the IAC launched HSN TV, Ticketmaster, Interval International and Tree lender. In July, the IAC discontinued Match – but only after it had grown into the largest dating app provider in the world by assembling more than 45 different online dating brands, including Tinder, Hinge and OkCupid. “We’ve restructured this company for 20 years,” Diller said in an interview with 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 down to take the reins at Expedia after the board ousted the former chief executive, chaired the company’s earnings conference call with analysts in February and oversaw a staff cut that eliminated 3,000 workers before travel bans and blockages caused bookings to fall 85%. As Expedia went into crisis mode, the existing IAC Internet Enterprise portfolio, which includes Homeociation and the Vimeo app video, flourished as the virus pushed more business into online platforms. And he headed the Match spinoff.
Diller, who has been a brave trader for more than two decades, sees opportunities in chaos. Instead of waiting for the pandemic to end before making his next move, he has instead rolled the dice at MGM Resorts with the IAC’s largest investment since the acquisition of Ask Jeeves in 2005 for $ 1.85 billion.
“Although we would never make the company, we know this is a big bet for the IAC,” Diller and IAC CEO Joey Levin wrote in a letter to shareholders. “The IAC has always been opportunistic with its capital, and if there has ever been time, this moment is unique,” they said in the letter, adding that the deal presents a “once in a decade opportunity” for the IAC to invest in a Large category with a great potential to relocate online.
MGM Resorts welcomed the IAC as a “long-term strategic partner” and said it aimed to invite them to join the company’s board of directors. “The IAC’s expertise in growing and expanding online brands is a natural fit for our focus on improving the resort experience through curated and personalized offers, as well as digital improvements in sports betting and online gaming,” he said in a statement. statement by MGM Resorts CEO Bill Hornbuckle. “We welcome their cooperation and are excited about the opportunities it will bring.”
MGM, like other casino operators, has been hit hard by the coronavirus, which caused a months-long closure of its US properties and a severe contraction in Macau. The company is able to rectify the storm, having sold almost all of its resorts to investors in a rental arrangement that freed up billions in cash. However, MGM has downsized staff and infuriated others while doing much less business due to the virus.
The company last month handed over its CEO position permanently to Hornbuckle, a veteran of the company who had served as CEO since March. In a previous role as chief marketing officer, Hornbuckle spearheaded MGM’s customer loyalty program, which the IAC cited as one of the attractive aspects of the company.
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