LAS VEGAS, April 28, 2015 /PRNewswire/ -- MGM Resorts
International (NYSE: MGM) today announced that it has sent a letter
to shareholders in connection with its 2015 Annual Meeting to be
held on May 28, 2015.
The full text of the letter is as follows:
April 28, 2015
Dear Fellow MGM Shareholders:
Your Board and management team are focused on continuing to
drive above industry average shareholder returns through the
development, implementation and execution of a multi-faceted
strategic plan. This strategy has already enabled MGM to deliver
105% total shareholder returns over the past three years and put
the company on a sustainable growth trajectory. We also
regularly review our strategic plan and conduct thorough
evaluations of all alternatives for further growth. Today, we
are also compelled to address 0.38% shareholder Land &
Buildings' ("L&B") flawed proposal and mischaracterization of
MGM's performance and investment decisions. In addition, we want to
make clear why the Board members targeted by L&B are integral
to the effectiveness of the MGM Board and the success of our
business.
MGM IS EXTREMELY WELL POSITIONED FOR FUTURE
SUCCESS
Contrary to L&B's assertions, MGM is very well positioned to
continue delivering value to shareholders and has a clear strategy
in place to deliver on the Company's potential. Major
strategic goals and opportunities for MGM include:
- Free cash flow generating development projects including:
- MGM Cotai
- MGM National Harbor
- MGM Springfield
- Mandalay Bay – room remodel and 350,000 square feet of
convention space expansion
- AEG/MGM Arena – 20,000 seat world class arena opening Spring
2016
- New park & entertainment district adjoining Monte Carlo and New
York-New York and leading up to the arena
- Leverage target of <5x within three years
- Increase financial flexibility to pursue future growth
projects
- Drive margin expansion via top line growth and cost savings
initiatives
- Expand on the benefits that the Company generates by
incorporating diversity as a business imperative
In addition to driving the implementation of this strategy,
MGM's Board has and will continue to actively evaluate all
strategic options for sustainable growth including a partial or
total REIT conversion. Our full Board is the right one to
oversee your investment in MGM and, as we recently disclosed,
Evercore Group L.L.C. has been engaged and added to MGM's team of
existing advisors to evaluate all strategic options.
MGM recently filed an updated investor presentation available at
www.mgmresorts.com under the Investors section that clearly
explains the Company's strong track record and why changing the
composition of the Board would be a mistake that would harm
shareholders' interests. We urge shareholders to read that
detailed presentation to get the facts.
MGM HAS DELIVERED ABOVE INDUSTRY AVERAGE
RETURNS AND THE BUSINESS IS PERFORMING STRONGLY
Since 2012, MGM's Board has driven strong operating performance
in net revenues and Adjusted Property EBITDA, achieving a 5% net
revenue CAGR and 11% Adjusted Property EBITDA CAGR.
Given this strong performance, L&B's analysis of MGM's
performance had to date all the way back to the financial crisis in
an attempt to paint in a bad light the good decisions made by MGM's
Board and management. The Company not only survived the
financial crisis, it is now outperforming its gaming peers and the
Dow Jones U.S. Gaming Index on a one and three-year
basis.
As of year end
2014
|
Total Shareholder
Returns
|
|
|
1
Year
|
3
Year
|
5
Year
|
Mar-09
(2)
|
|
DJ U.S. Gaming
Index
|
(18.8%)
|
54.1%
|
148.0%
|
556.3%
|
|
Gaming Peers Median
Returns (1)
|
(17.7%)
|
59.5%
|
147.8%
|
446.5%
|
|
MGM Resorts
International
|
(9.1%)
|
105.0%
|
134.4%
|
940.2%
|
|
(1)
Gaming Peers include: LVS, WYNN, BYD, PENN (inclusive of GLPI), CZR
and PNK
|
(2) TSR
performance for the gaming peer stocks since MGM's stock bottomed
on March 5, 2009
|
MGM'S BOARD HAS ALWAYS FOCUSED ON – AND
DELIVERED – STRATEGIC INITIATIVES TO DRIVE ENHANCED SHAREHOLDER
VALUE
In addition to implementing a successful strategy to drive MGM's
strong operating performance, the Board has successfully positioned
the Company for sustainable growth. The Board has
thoughtfully allocated capital by enhancing existing properties and
has also supported trend setting capital-light partnership
strategies. The capital investments the Company is currently
making will ensure long-term value creation. We believe
L&B's assertion that we stop making those investments in the
Company's future is completely unsupportable.
L&B has put forth contradictory views of the Company's
development projects and investment history.
- March 17, in a letter to MGM
shareholders, L&B states that it expects "significant
development value creation on in-process and potential
projects...Value creation over $2
included in base case, with $13
additional potential in bull case."
- April 20, L&B states that MGM
"has a history of poor investment decisions" and that "the Board
continues to make the same capital-allocation mistakes."
These two statements are clearly inconsistent.
MGM'S BOARD HAS SIGNIFICANTLY IMPROVED THE
COMPANY'S BALANCE SHEET
The Board skillfully navigated the Company through the crisis
and has since made significant progress in de-levering and
improving the balance sheet to position the Company for long-term
value creation. L&B's criticisms of MGM's balance sheet
management are unfounded. The success of MGM in recent years
validates the Board's decisions and is indicative of the
effectiveness of the complementary experience and expertise of our
Board members.
These initiatives include:
- Significant improvements to our credit profile, resulting in
Moody's and S&P upgrading our corporate credit ratings by three
levels to B2 / B+
- Reducing the cost of long-term bond issuances from 11.9% in
2009 to 6% in 2014
The Board's actions recognize the critical importance of
continuing to improve the Company's balance sheet to enable
uninterrupted execution of its strategic plan during all market
cycles. The Company remains focused on executing further
opportunities to de-lever the balance sheet including:
- Regular dividend policy at MGM China and CityCenter
- Conversion of $1.45 billion in
convertible bonds on April 15,
2015
- Continued free cash flow growth
REPLACING FOUR DIRECTORS WITH L&B'S
NOMINEES WOULD CREATE SIGNIFICANT SKILL SET GAPS AND
UNDERMINE THE COMPANY'S EFFECTIVENESS
MGM's highly-skilled, independent and diverse group of
experienced Directors is deeply familiar with the Company's
business, has been licensed in multiple jurisdictions, and is
highly qualified to provide effective oversight and lead the
Company in formulating its strategy. The Board has extensive
c-suite and government experience, expertise in gaming, lodging,
real estate and finance, as well as public company
directorship.
If L&B is successful in removing the directors it has
targeted, MGM will lose critical experience in labor and government
relations, gaming and hospitality, media, international business,
public utilities, energy, sustainability, and diversity programs,
among other areas that are of critical importance to our
business.
Each of these four Directors makes extremely valuable
contributions to our Board:
- Robert Baldwin brings
vast experience in the gaming/resort/lodging industry, leadership,
real estate and finance, with over three decades of experience
running every aspect of operations in Las
Vegas gaming properties. He is currently Chief Design
and Construction Officer of the Company, and is also currently
President and Chief Executive Officer of the CityCenter joint
venture.
- Alexis Herman brings
expertise in leadership, finance, government/policy, and public
company directorship. Herman is the former U.S. Secretary
of Labor having served on President Clinton's Cabinet for four
years and is now the CEO of consulting firm New Ventures LLC, and a
Director of The Coca-Cola Company. She also serves as Chair
of the Diversity & Inclusion Business Advisory Board of Sodexo,
Inc. and as Chair of Toyota Motor Corporation's North American
Diversity Advisory Board.
- Roland Hernandez has
deep financial expertise and strong leadership experience in the
gaming/resort/ lodging industry, as well as media and real
estate. He is a Director of Vail Resorts Inc., Chairman
of hotel and adventure travel company Belmond Ltd. (formerly
Orient-Express Hotels Ltd.) and a Director of US Bancorp. He
was formerly Chairman and Chief Executive Officer of
Spanish-language television broadcast network Telemundo Group, Inc.
and was a Director of Sony Corporation and the Ryland Group, Inc.,
a real estate/home construction company, among other former public
company directorship roles.
- Rose McKinney-James
brings important expertise in government/policy as well as
leadership in the gaming/resort/lodging industry, finance and
public company directorship. She has served as Director
of Marketing and External Affairs of Nevada State Bank Public
Finance and had leadership roles at two Nevada state government agencies as former
Commissioner with the Nevada Public Service Commission, and as a
Director of the Nevada Department of Business and Industry.
She serves on the Board of MGM Grand Detroit, LLC.
L&B'S COMMENTS ABOUT THE TARGETED
DIRECTORS DEMONSTRATE ITS LACK OF UNDERSTANDING OF OUR
BUSINESS
On an April 20, 2015 appearance on
Bloomberg TV, Jonathan Litt said,
"Diversity for diversity's sake doesn't add a lot of value at the
Board level." Putting aside these Directors' undeniable
qualifications to sit on our corporate Board, L&B is evidently
unaware of, or deliberatively chooses to disregard, the fact that
MGM operates a global business and faces a variety of complex
issues that require diverse perspectives. It is paramount to
have Directors who have a fundamental understanding of our clients,
customers and vendors in order to succeed.
In fact, jurisdictions often include diversity at all levels of
the Company in their evaluation criteria when considering
competitive bids for a limited number of licenses, as was the case
in both Maryland and
Massachusetts. MGM won both of these gaming licenses, and in
both cases, the fact that diversity was an integral aspect of our
business was recognized as a distinguishing factor in the
evaluations.
Instead, L&B advocates that the Company does not need
diverse backgrounds and perspectives on its Board, but would prefer
a slate of Directors who have narrow experience in the areas of
REITs and real estate and would presumably work to advance the
flawed proposal that L&B is now retreating from when
questioned.
L&B'S PROPOSAL MAKES NUMEROUS INCORRECT
FINANCIAL, STRUCTURAL AND TAX ASSUMPTIONS
We have spoken to numerous investors and analysts who agree with
us that L&B's proposal is flawed and contains fundamental
inaccuracies that underscore its lack of understanding of our
business, including:
- Unsubstantiated cash flow assumptions that drive L&B's
value creation proposition
- Inconsistent and overlapping use of both net lease and lodging
REIT structures
- Significant leveraging and an untenable special distribution by
MGM China
- Unaddressed and oversimplified assessment of financial,
structural and tax issues associated with a REIT conversion, asset
sales, and an MGM China dividend
- Failure to consider the complexities of operating and growing a
global gaming company to maximize long-term shareholder value by
focusing its thesis in a narrow short-term fashion
Further errors in L&B's analysis include:
- Overstating feasible amount of rent, resulting in negative
property level free cash flow after maintenance capital
expenditures and jeopardizing compliance with REIT qualified rent
rules
- Creating a financially unsustainable OpCo and low-quality
single-tenant REIT
- Does not account for tax consequences of asset sales or levered
distribution from MGM China
- Ignoring REIT conversion requirement that accumulated earnings
and profits ("E&P") be distributed to shareholders
- Failing to address development funding in projected debt
levels
Exemplifying L&B's many erroneous statements, they have
suggested that MGM's November 2014
bond offering was subject to "an onerous pre-payment penalty," as a
means of suggesting that we are not truthfully evaluating a REIT
structure. The Company's bonds include a typical pre-payment
provision; however, this provision does not preclude us from
pursuing strategic initiatives, including a potential partial or
total REIT conversion. This information is publicly available
and further calls into question the integrity of L&B's
analysis. L&B also stated that the Company has included a
"dead-hand put" in recent bond offerings under which the bonds
would be required to be paid in full if a majority of the Board
were to be replaced. That is inaccurate—there is no such
provision in any of the Company's bonds. There is a provision
in the Company's credit agreement allowing the acceleration of debt
if a majority of the Company's board is replaced under certain
circumstances; however, the Company and Bank of America, N.A., the
administrative agent under the Company's credit agreement, have
been working over the past several months to remove this provision,
and have commenced the process to amend the credit agreement to
remove this provision and expect to have this amendment finalized
shortly.
MGM has and will continue to actively evaluate all strategic
options, including a partial or total REIT conversion with the
assistance of our expert advisors, which now includes, Evercore
Group L.L.C. The retention of this team of industry leading
experts demonstrates our commitment to thoroughly and
professionally evaluate all options.
MGM HAS THE RIGHT BOARD TO CONTINUE
GENERATING SUBSTANTIAL VALUE FOR ITS SHAREHOLDERS
PROTECT YOUR INVESTMENT IN MGM AND VOTE FOR
THE NOMINEES WHO HAVE BEEN AND WILL CONTINUE TO SERVE YOUR
INTERESTS
YOUR VOTE IS IMPORTANT – VOTE THE WHITE PROXY
CARD TODAY!
Under this Board's oversight, we have driven significant growth
and our future is bright. MGM's existing Board has a proven
record of results and will continue to be committed to delivering
ongoing benefits for all shareholders. We urge shareholders
to discard any gold proxy cards from L&B. We believe
MGM's Board and management team are well-positioned for continued
success and to drive even stronger shareholder value over the
long-term.
Sincerely,
The Board of Directors of MGM Resorts International
Robert Baldwin,
William Bible, Mary Chris Gay, William
Grounds, Alexis Herman,
Roland Hernandez, Anthony Mandekic, Rose
McKinney-James, James Murren,
Gregory Spierkel, and Daniel
Taylor
If you have any questions or require assistance
voting your proxy,
please contact the Company's proxy solicitor:
Georgeson
480 Washington Blvd – 26th
Floor
Jersey City, New Jersey 07310
Toll-Free (866) 729-6818
Email: MGMResorts@Georgeson.com
About MGM Resorts International
MGM Resorts
International (NYSE: MGM) is one of the world's leading global
hospitality companies, operating a portfolio of destination resort
brands including Bellagio, MGM Grand, Mandalay Bay and The Mirage.
The Company is in the process of developing MGM National Harbor in
Maryland and MGM Springfield in
Massachusetts. The Company also owns 51 percent of MGM China
Holdings Limited, which owns the MGM Macau resort and casino and is
developing a gaming resort in Cotai, and 50 percent of CityCenter
in Las Vegas, which features ARIA
Resort & Casino. For more information about MGM Resorts
International, visit the Company's website at
www.mgmresorts.com.
Forward-Looking Statements
Statements in this release
that are not historical facts are forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act
of 1995 and involve risks and/or uncertainties, including those
described in the Company's public filings with the Securities and
Exchange Commission. MGM has based forward-looking statements on
management's current expectations and assumptions and not on
historical facts. Examples of these statements include, but are not
limited to, statements regarding strategic transactions MGM may
pursue in the future and the finalization of an amendment to the
Company's credit agreement. These forward-looking statements
involve a number of risks and uncertainties. Among the important
factors that could cause actual results to differ materially from
those indicated in such forward-looking statements include effects
of economic conditions and market conditions in the markets in
which MGM operates and competition with other destination travel
locations throughout the United
States and the world, the design, timing and costs of
expansion projects, risks relating to international operations,
permits, licenses, financings, approvals and other contingencies in
connection with growth in new or existing jurisdictions and
additional risks and uncertainties described in MGM's Form 10-K,
Form 10-Q and Form 8-K reports (including all amendments to those
reports). In providing forward-looking statements, MGM is not
undertaking any duty or obligation to update these statements
publicly as a result of new information, future events or
otherwise, except as required by law. If MGM updates one or more
forward-looking statements, no inference should be drawn that it
will make additional updates with respect to those other
forward-looking statements.
Important Additional Information
MGM has filed a
proxy statement on Schedule 14A and other relevant documents with
the Securities and Exchange Commission ("SEC") in connection with
the solicitation of proxies for its 2015 Annual Meeting of
Stockholders or any adjournment or postponement thereof (the "2015
Annual Meeting") and has mailed the definitive proxy statement and
a WHITE proxy card to each stockholder of record entitled to vote
at the 2015 Annual Meeting. STOCKHOLDERS ARE STRONGLY ADVISED TO
READ MGM's 2015 PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR
SUPPLEMENTS THERETO) AND ANY OTHER DOCUMENTS FILED WITH THE SEC
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Stockholders may obtain a free copy of the 2015 proxy
statement, any amendments or supplements to the proxy statement and
other documents that MGM files with the SEC from the SEC's website
at www.sec.gov or MGM's website at
http://mgmresorts.investorroom.com/ as soon as reasonably
practicable after such materials are electronically filed with, or
furnished to, the SEC.
Participants in Solicitation
MGM, its directors, its
executive officers and its nominees for election as director may be
deemed participants in the solicitation of proxies from
stockholders in connection with the matters to be considered at the
2015 Annual Meeting. Information regarding the persons who may,
under the rules of the SEC, be considered participants in the
solicitation of MGM's stockholders in connection with the 2015
Annual Meeting, and their direct or indirect interests, by security
holdings or otherwise, which may be different from those of MGM's
stockholders generally, are set forth in MGM's definitive proxy
statement for the 2015 Annual Meeting on Schedule 14A that has been
filed with the SEC and the other relevant documents filed with the
SEC.
Use of Non-GAAP Measures
Adjusted EBITDA and Adjusted
Property EBITDA are non-GAAP financial measures. A reconciliation
to the GAAP measures and other information for the three year
period ended December 31, 2014 can be
found on pages 39 through 41 of the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section
of MGM's Annual Report on Form 10-K for the fiscal year ended
December 31, 2014, filed with the SEC
on March 2, 2015. A
reconciliation to the GAAP measures and other information for the
three year period ended December 31,
2011 can be found on pages 49 through 51 of the
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of MGM's Annual Report on Form 10-K
for the fiscal year ended December 31,
2011, filed with the SEC on February
29, 2012.
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SOURCE MGM Resorts International