The deal was announced Wednesday morning before the market opened.
In a call with analysts, Vici CEO Ed Pitoniak called it “a very compelling transaction for Vici” that’s expected to be add to earnings right away once the deal closes.
“This is merging MGP’s best-in-class portfolio into Vici’s best-in-class management and governance platform.”
Shares of Vici (ticker: VICI) were at $30.21 Wednesday morning, down about 0.2% in premarket trading. MGM Growth Properties (MGP) had gained 9.1% to $40.50. Both companies are real estate investment trusts.
The deal, expected to close in the first half of next year, values MGP’s Class A stock at $43 a share, a 15.9% premium from Tuesday’s closing price. Under the deal’s terms of the agreement, those class A shareholders will receive 1.366 shares of newly issued Vici stock in exchange for the MGP shares.
Barron’s last week cited MGP as a stock to own during the uncertainty for travel and leisure stocks brought on by the Delta variant, pointing to the company’s steady cash flow and the resilience of its dividend.
MGP was created in 2016 as a way for
MGM Resorts International
(MGM) to offload some of its properties while still operating them.
The deal’s terms include “cash distributed to MGM resorts for the redemption of the majority of its MGP operating partnership units,” according to Vici’s general counsel, Samantha Gallagher.
MGM Resorts International’s stock had risen 2.9% to $$38.01 in premarket trading. That company, and others in the industry, has moved toward an asset-light model in which it focuses more on operating properties.
MGP’s real estate portfolio, in addition to some regional casino properties, includes Mandalay Bay and New York-New York on the Las Vegas Strip.
For New York-based Vici, this marks the second megadeal related to Las Vegas this year. In March, the company said it would acquire the Venetian Resort’s real estate on the Strip in Las Vegas for $4 billion in cash.
In an interview last month, Cedrik Lachance, director of research at Green Street, said that Las Vegas real estate was becoming increasingly attractive and that he expected more deals.
Under the deal, Vici will also assume $5.7 billion of MGP’s debt.
Vici is set up as a triple-net lease, meaning that it doesn’t have to pay for maintenance and capital improvements while collecting rent payments from tenants. REITs typically receive regular rent increases that are built into leases.
Pitoniak said the average lease of the combined company will be 43.5 years in duration.
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