MGM Resorts International MGM and MGM Growth Properties LLC MGP announced that MGM Resorts has inked a definitive agreement to acquire a 50% stake in Boyd Gaming Corporation's BYD Borgata Hotel Casino & Spa. MGM Resorts will pay a sum of $900 million for Borgata Hotel Casino & Spa, which is located in Atlantic City, NJ.
MGM Resorts will pay approximately $600 million for the stake in Boyd Gaming, and assume and refinance Borgata's outstanding debt of approximately $600 million.
Per the deal, following the purchase of Boyd Gaming's 50% stake in Borgata, MGM Resorts will sell all of Borgata's real property to MGM Growth Properties for approximately $1.18 billion.
All the agreements are expected to close in the third quarter of 2016, subject to regulatory approvals and other customary closing conditions.
MGM Growth Properties expects to fund the acquisition of the Borgata property and assumption of the debt with existing cash on hand and borrowings under its senior secured revolving credit facility. Further, it will fund the acquisition through the issuance of operating partnership units to a subsidiary of MGM Resorts, based on MGM Growth Properties’ closing price of $23.03 as of May 27.
Borgata, a leading resort in Atlantic City, will complement MGM Resorts’ increasing presence in the northeastern U.S. With the U.S. economy currently recovering and tourism on the uptrend, the company is aiming to capitalize on the surge in demand for casinos.
MGM Resorts carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include Monarch Casino & Resort Inc. MCRI, which carries a Zacks Rank #2 (Buy). Investors interested in the broader consumer discretionary sector may also consider Hasbro Inc. HAS, which carries the same Zacks Rank as Monarch Casino.
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