LAS VEGAS, May 6, 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:
May 6, 2015
Dear Fellow MGM Shareholders:
Your Board and management are focused on continuing to ensure
MGM fulfills its full potential and delivers sustainable value to
its shareholders. However, as you know, 0.38% shareholder
Land & Buildings ("L&B") is trying to gain four seats on
your Board, and as part of its campaign it has made many inaccurate
and misleading statements about the Company, its Board and
management. While we do not believe it is productive to
address every mischaracterization and distortion made by L&B,
we do feel it is very important that shareholders understand some
key facts about your Board:
- We are ALWAYS receptive to any shareholder with a constructive
view on how to create value
- We have for some time been actively evaluating all strategic
initiatives for the Company, including a potential partial or total
REIT strategy
- We are demonstrably committed to best corporate governance
practices and are very proactive in our oversight of the Company to
ensure it delivers sustainable value to shareholders
- We have ensured that your Company has performed very well
against its actual peers and is extremely well positioned for
future success
MGM HAS BEEN – AND CONTINUES TO – ACTIVELY
EVALUATE ALL STRATEGIC INITIATIVES FOR THE COMPANY
As we have said on numerous occasions, your Board has
proactively evaluated the REIT concept for many years and we are
very thoroughly doing so again now. In the past we have
decided not to pursue this strategy for a number of reasons.
That said, we are acutely aware that our business and the
markets in which we operate continuously evolve and it is crucial
to our future success that we regularly evaluate all avenues to
unlock value, which we are doing.
As such, your Board and management have engaged a team of
industry leading investment bankers, legal advisors and tax
consultants to once again complete a thorough review of a potential
REIT conversion transaction for the Company. In recent weeks
we announced the addition of Evercore Group L.L.C. to that
team. MGM is a complex, global business and it will take some
time to thoroughly and properly evaluate this opportunity, but we
are actively doing so.
MGM'S OPERATING PERFORMANCE IS STRONG
MGM has delivered significant value to its shareholders, and
when compared to its peers, MGM has performed well:
MGM has outperformed its gaming peers and the Dow Jones U.S.
Gaming Index on a one and three-year basis. Since bottoming
during the financial crisis, MGM has also significantly
outperformed its gaming peers and the Dow Jones U.S. Gaming
Index.
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 EV/EBITDA 2014 multiple was about 10.5x, which is
above the median industry multiple of 9.5x
|
EV /
EBITDA
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
2015E
|
2016E
|
Gaming Peer EBITDA
Multiple
|
|
|
|
|
|
|
|
|
|
|
|
MGM Resorts
International
|
17.0x
|
|
12.1x
|
|
10.9x
|
|
11.4x
|
|
10.5x
|
12.0x
|
11.1x
|
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas Sands
Corp.
|
20.3x
|
|
13.0x
|
|
13.5x
|
|
15.4x
|
|
10.2x
|
12.1x
|
11.5x
|
|
|
|
|
|
|
|
|
|
|
|
|
Wynn Resorts,
Limited
|
14.1x
|
|
10.4x
|
|
10.2x
|
|
13.3x
|
|
11.5x
|
13.0x
|
10.8x
|
|
|
|
|
|
|
|
|
|
|
|
|
Caesars
Entertainment Corporation
|
NA
|
|
NA
|
|
28.6x
|
|
12.0x
|
|
13.5x
|
10.3x
|
10.3x
|
|
|
|
|
|
|
|
|
|
|
|
|
Boyd Gaming
Corporation
|
10.9x
|
|
9.1x
|
|
12.5x
|
|
8.9x
|
|
7.8x
|
8.6x
|
8.2x
|
|
|
|
|
|
|
|
|
|
|
|
|
Penn National
Gaming, Inc.
|
7.8x
|
|
8.1x
|
|
10.8x
|
|
2.7x
|
|
7.5x
|
7.3x
|
6.4x
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinnacle
Entertainment, Inc.
|
8.6x
|
|
7.3x
|
|
8.1x
|
|
15.4x
|
|
8.9x
|
9.6x
|
9.5x
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming Peer Median
Multiple
|
10.9x
|
|
9.1x
|
|
11.6x
|
|
12.7x
|
|
9.5x
|
9.9x
|
9.9x
|
MGM Relative
Performance
|
6.1x
|
|
3.0x
|
|
(0.8x)
|
|
(1.3x)
|
|
1.0x
|
2.0x
|
1.2x
|
Source: Company
filings; FactSet
|
|
|
|
|
|
|
|
|
|
- MGM's Adjusted Property EBITDA margins were a solid 24.5%
in 2014, which is higher than the industry median
|
EBITDA
Margins
|
|
|
|
|
|
|
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
|
|
|
|
|
MGM Resorts
International
|
17.8%
|
22.3%
|
21.8%
|
24.0%
|
24.5%
|
Las Vegas Sands
Corp.
|
28.2%
|
34.4%
|
30.5%
|
32.4%
|
35.5%
|
Wynn Resorts,
Limited
|
24.6%
|
26.7%
|
27.2%
|
29.6%
|
29.1%
|
Penn National
Gaming, Inc.
|
23.7%
|
25.4%
|
23.5%
|
22.6%
|
9.8%
|
Boyd Gaming
Corporation
|
18.4%
|
18.9%
|
16.9%
|
20.0%
|
21.1%
|
Pinnacle
Entertainment, Inc.
|
18.3%
|
20.7%
|
22.0%
|
18.2%
|
25.2%
|
Caesars
Entertainment Corporation
|
19.8%
|
20.6%
|
21.1%
|
20.8%
|
16.6%
|
|
|
|
|
|
|
Gaming Peer
Median
|
21.7%
|
23.1%
|
22.7%
|
21.7%
|
23.2%
|
MGM Relative
Performance
|
(4.0%)
|
(0.8%)
|
(0.9%)
|
2.3%
|
1.3%
|
Source: Company
Management; company filings
|
|
|
- In L&B's latest presentation, it selectively chose to
compare MGM to WYNN and LVS, but these are very different companies
due to our varied geographic footprints, revenue sources and
overall size
- Geographic footprint: MGM receives approximately 70% of
its Adjusted EBITDA from the U.S., compared to <30% for WYNN and
<10% for LVS – these are clearly different geographic
footprints
- Revenue sources: Casino revenues represented 54% of
MGM's 2014 gross revenue, as compared to 73% and 78% for WYNN and
LVS, respectively
- Size: MGM's $12 billion
equity value is comparable in scale to WYNN's $14 billion; however, it is considerably smaller
than LVS's $44 billion
- A more relevant analysis would be on a property specific basis
as Bellagio is more fairly compared to Wynn/Encore and
Venetian/Palazzo in Las Vegas, and
in this regard Bellagio has performed in line, if not better than,
its peers
Source: Company filings
MGM HAS A HISTORY OF MAKING STRONG ROIC INVESTMENTS, HAS
DRAMATICALLY IMPROVED ITS BALANCE SHEET & HAS FURTHER
OPPORTUNITIES TO DE-LEVER
- History of strong ROIC investments:
- MGM China:
- MGM investment in MGM China is $341
million
- Distributions and dividends to date to MGM = $1.3 billion
- MGM owns 51% of MGM China's public market capitalization of
$7.6 billion, equaling $3.9 billion in value to the Company
- MGM Detroit:
- Total spend on current MGM Detroit facility of $800 million
- MGM Detroit is generating stabilized Adjusted Property EBITDA
of ~$150 million (reflects average
over the trailing two years)
- ROIC: 19%
- Consistent market leader with over 40% market share
- MGM has made significant progress in improving its balance
sheet:
- Net leverage on the Company's wholly owned domestic resorts
(restricted group) has decreased from 10.1x to 8x pro forma for the
conversion of the convertible notes in April
2015. Consolidated net leverage pro-forma for the conversion
of the notes is now less than 5x
- Significant improvements to 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
- MGM's Board has also been proactive in selling assets and
de-risking its portfolio:
- Management sold: Golden Nugget, Primm, Laughlin, 50% of CityCenter, and Treasure Island
- Further opportunities to de-lever the balance sheet in the
near term include:
- Regular dividend policy at MGM China and CityCenter
- Continued free cash flow growth
L&B LACKS CREDIBILITY & DOES NOT DESERVE
REPRESENTATION ON MGM'S BOARD
L&B has made inaccurate and misleading claims about MGM's
business, its Board and even L&B's own proposal. In determining
whether to elect L&B's nominees to our diverse and experienced
Board, we ask shareholders to consider the following:
Flawed Proposal – L&B's initial proposal was riddled
with errors and inaccurate assumptions. We believe it was
widely disregarded by Wall Street analysts and L&B had to
significantly revise it.
To name just a few substantive revisions to L&B's plan:
- The high end of L&B's pro forma valuation of MGM was
lowered by 40% from $55 in its
initial proposal to $33 in its
revised draft
- The MGM China dividend decreased by over 60%, from $2.6 billion in its original proposal, to
$1 billion in its latest
- EBITDA multiples for OpCo and PropCo were reduced by half to
one whole turn
Despite all of this, L&B's revised proposal is still flawed
and leaves critical items unaddressed or improperly accounted for,
including:
- Not providing a clear description of lease terms and mechanics
between OpCo and PropCo
- Using a lodging REIT model rather than traditional net lease
model without clarifying how this is possible
- Overstating rent payments and understating corporate
expenses
- Not accounting for debt repayment on assumed asset sales
- Ignoring that MGM China would still be overlevered vs. direct
peers even with L&B's revised $1
billion dividend
- Failing to address E&P purge and related funding
requirements, and related party ownership rules
L&B Nominees Are WRONG For its Own Campaign and For MGM's
Board – When L&B initially launched its campaign, it said
its Board nominees would be able to "properly evaluate the
strategic options for MGM's real estate and capital
structure." Following Wall Street's negative reaction to
L&B's proposal and MGM's highlighting of the mistakes in their
analysis, L&B has backed off its plan, saying "this election is
not a vote on our proposed REIT structure."
L&B's unwarranted proxy contest has switched to attacking
MGM's performance and Board's oversight. However, L&B's
nominees are neither corporate governance nor gaming industry
experts.
Dead Hand Put – It is important to note that the dead
hand put language was requested by the lenders and never the MGM
Board. While L&B has attempted to take credit for raising
this issue – it is public information that MGM had been pursuing an
amendment to its credit agreement and as of May 4, 2015, has now done so.
- On March 2, 2015 MGM's 10K
filing states: "… agreed to extend the deadlines… until
April 7, 2015, to allow the Company
and Bank of America to pursue amendment of the credit agreement in
the second quarter of 2015…"
- On April 20, 2015 in a press
release from L&B: L&B began pointing to a "dead hand
put" in our credit agreements, and since described it as an
"egregious entrenchment technique"
- As of Monday, May 4, 2015,
the Company amended its credit facility thereby eliminating this
provision
Compensation – Contrary to L&B's assertions, MGM has
achieved excellent executive-shareholder alignment with its
compensation program.
- The Compensation Committee is chaired by Dan Taylor, a Tracinda representative on your
Board, and he and the committee have worked closely with
F.W. Cook to design a program that
aligns managements' interests with those of shareholders
- ISS has issued a compensation practices Quickscore rating of 2,
which is the second best decile rating and indicates a "low concern
level"
- A significant portion of executive compensation at MGM is tied
to achievement of performance goals or the Company's stock price
(79% of target compensation for the CEO is based on performance
goals and stock performance)
- For 2014, the majority of our CEO's compensation (57.9%) was in
the form of long-term incentives tied to stock performance
- Our Compensation Committee regularly evaluates our program in
light of input from shareholders and current best practices
- L&B initially indicated its intention to vote in favor of
our executive compensation program but then reversed course
arbitrarily
- Concocted compensation concerns seem to be yet another attempt
to shift focus from L&B's ill-informed strategic proposal
False insinuations made against Roland Hernandez and comments made by L&B
nominee Richard Kincaid call into
question L&B's integrity:
- On April 30, 2015, in a press
release from L&B: "A board led by Lead Independent Director
Roland Hernandez pressured one of
our nominees, Richard Kincaid from
the Vail Resorts, Inc. Board of Directors"
-
On May 1, 2015, in a press
release from Vail Resorts: "Vail Resorts governance guidelines
require that before directors accept an invitation to serve on
another public board of directors, they should inform the
Nominating & Governance Committee…Mr. Kincaid indicated that
regardless of the views of the Vail Resorts Board of Directors, he
would not withdraw from the MGM situation. Mr. Kincaid indicated
that if asked, he would resign from the Vail Resorts Board of
Directors, but Mr. Kincaid cautioned that if he was asked to
resign, Land and Buildings would likely attempt to make Vail
Resorts an "issue" in the MGM situation, which could be
detrimental to Vail Resorts. After reviewing Mr. Kincaid's
actions and statements, the Vail Resorts Board of Directors
(excluding Mr. Hernandez) discussed the situation and asked Mr.
Kincaid to resign, which he did…"
Corporate governance practice, and equally importantly
privileged gaming licenses, requires Directors to be stewards of
the Company, displaying honesty, integrity and candor. Based
on L&B's comments and actions to date, as highlighted in this
letter, we do not believe that the L&B nominees have
demonstrated these qualities.
MGM HAS STRONG CORPORATE GOVERNANCE PRACTICES &
SHAREHOLDER PERSPECTIVE ON OUR BOARD TO ENSURE EFFECTIVE
OVERSIGHT
Your Board is committed to best practices in corporate
governance. In addition to significant shareholder representation
on the Board, MGM received a favorable ISS governance and executive
compensation report in 2014, and as of May
1, 2015, enjoys an ISS Governance Quickscore of 1 (the best
possible). MGM's Board has also been significantly refreshed,
bringing in additional perspectives, including adding four new
directors in the past five years.
Our goal is to ensure that MGM meets its full potential for the
benefit of all shareholders, and that is exactly what we are
focused on achieving. 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.
Removing the targeted directors would result in MGM losing
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 the
four targeted directors makes extremely valuable contributions to
our Board and we would be at a disadvantage with the departure of
any one of them and the subsequent substitution by a candidate on
L&B's slate. In fact, two of the L&B nominees only
have public company board experience of short duration resulting
from activist campaigns they were personally associated with.
JOIN THE MGM INVESTORS WHO HAVE PUBLICLY SUPPORTED MGM'S
BOARD
We are very encouraged by our recent conversations with our
fellow shareholders and the support they have voiced for our four
highly qualified nominees. In fact, shareholders representing 25%
percent of MGM's total shares outstanding have publicly supported
the Company.
- Tracinda Corporation, MGM's largest shareholder,
publicly supported MGM on May 1,
2015, saying, "We are very confident that the current
Board and management team are committed to – and more than capable
of – evaluating all avenues to deliver sustainable value […] Based
on the Board's commitment, as well as the strong performance of the
business since the financial crisis we intend to vote our shares
for the current Board's nominees."
- Infinity World, beneficial owners of approximately 26
million shares. MGM CEO Jim Murren
disclosed in a Bloomberg interview on May 4,
2015 that Infinity World supports the MGM Board
nominees.
- John Paulson of Paulson &
Co., beneficial owners of approximately 7 million shares, also
publicly supported MGM's Board when asked about a REIT conversion
on April 29, 2015, saying, "That
is worth exploring […] And the Company is exploring it."
Furthermore, in the same interview, Paulson is described as
"…opposing [L&B's] board slate pressing MGM Resorts
International to create a real estate investment
trust."
YOUR VOTE IS IMPORTANT – VOTE THE WHITE PROXY CARD
TODAY!
REJECT L&B'S BID FOR YOUR VOTE – DO NOT VOTE
ON THE GOLD PROXY CARD
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 expected EV/EBITDA multiples. 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.
CONTACTS:
News
Media
JIM
BARRON/JARED
LEVY/EMILY DEISSLER/BEN
SPICEHANDLER
Sard Verbinnen &
Co
(212)
687-8080
Investment Community
SARAH
ROGERS
MGM Resorts International
Vice President, Investor
Relations
(702) 693-8654
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SOURCE MGM Resorts International