Key Takeaways:
Bleichmar Fonti & Auld LLP opened an investigation into Barry Diller's proposed $48.30-a-share buyout of MGM Resorts International (NYSE:MGM), citing potential breaches of fiduciary duty by the casino operator's board.
"The conflicts of interest here are significant because Diller stands on both sides of the proposed transaction," said Adam McCall, a partner at BFA Law. "Under Delaware law, the board must take strict steps to cleanse those conflicts and ensure the deal is fair to all stockholders."
Diller, a member of MGM's board, controls People Inc. — formerly IAC — which is the company's largest single stockholder. People made the unsolicited bid on June 1 and recently secured the right to designate two MGM directors through a governance agreement. The offer represents a roughly 1 percent premium to MGM's closing price of $47.81 on June 30, according to market data.
The investigation centers on whether MGM's board can independently evaluate a bid from its own director and controlling shareholder. Delaware corporate law requires that conflicted transactions undergo either approval by a special committee of independent directors or a vote by disinterested stockholders — a process known as "cleansing." MGM said in a June 1 statement that its board "will carefully review and consider the proposal to determine the course of action that it believes is in the best interests of the Company and all of its shareholders."
MGM operates 31 hotel and casino destinations globally and generated about $17.5 billion in revenue in fiscal 2025, though its net margin stood at just 1.2 percent. The company carries a debt-to-equity ratio of roughly 11.9 times, limiting its financial flexibility. Royal Caribbean Cruises, a peer in the consumer travel space, trades at 18.3 times forward earnings versus MGM's 28.9 times, according to Financial Modeling Prep data.
If the investigation finds that the board failed to properly manage the conflict, shareholders could challenge the deal in Delaware's Court of Chancery, potentially delaying or derailing the transaction. BFA Law is urging current MGM stockholders to come forward as it examines whether the proposed buyout complies with state law.
This article is for informational purposes only and does not constitute investment advice.
