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Land and Buildings Sends Letter to Shareholders of MGM Resorts InternationalLand and Buildings Investment Management, LLC ("Land and Buildings") sent a letter to shareholders of MGM Resorts International (NYSE:MGM) ("MGM" or the "Company") announcing that today it is distributing definitive proxy materials in support of electing Land and Buildings' four independent, highly qualified, nominees to the Board of MGM who Land and Buildings believes have the experience and independent perspectives needed to fix what we view as the broken boardroom culture at MGM and explore value-unlocking alternatives. The full text of the letter is as follows: April 20, 2015 Dear Fellow MGM Shareholder: Land and Buildings is an investment firm that specializes in investing in publicly traded real estate and real estate related securities. We are seeking your support to elect four independent, highly-qualified individuals to the Board of Directors of MGM (the "Board") - Matthew Hart, Richard Kincaid, Jonathan Litt and Marc Weisman. We believe that these candidates have experience in precisely the areas in which MGM has a poor track record and where the Board needs the most help: lodging, balance sheet management, capital allocation, real estate expertise and exploration of alternatives in today's capital markets. Our nominees will bring fresh perspectives and accountability to a Board that we believe is in desperate need of improved stewardship. We urge you to vote the enclosed GOLD proxy card TODAY by telephone, over the Internet, or by signing, dating and returning your GOLD proxy card in the postage-paid envelope provided. MGM is a Relentless Underperformer The Board has presided over consistent underperformance to its peers. Strikingly, since Jim Murren became Chairman and CEO in 2008, MGM has underperformed its peer group median by 453%. MGM Has Underperformed its Peers by Approximately 453% Since Jim Murren Became Chairman and CEO Table Reflects MGM's Performance Relative to that of its Peers over the Last 1-, 3- and 5-Year Periods and Since Mr. Murren Became CEO
The Board has clearly failed to appreciate the magnitude of this underperformance as the status quo has continued: poor capital allocation, poor balance sheet management and failure to capitalize on the underlying value embedded in the Company's real estate. MGM's Persistent and Consistent Undervaluation The Board has failed to address the continual and substantial EBITDA multiple discount to its closest peers1, in our view. We believe one of the key reasons for the persistent discounted valuation is the Company's overleveraged balance sheet combined with a history of poor investment decisions (e.g. CityCenter). Rather than take advantage of the current favorable capital markets environment to reduce debt - which could help MGM close its persistent valuation gap - the Board continues to make the same capital-allocation mistakes it made leading up to the Company teetering on bankruptcy seven years ago. The Company is currently further leveraging its balance sheet by embarking on $5 billion of new development. MGM's Valuation is Significantly Discounted to its Closest Peers While Leverage Levels are Significantly Higher
Significant Upside to Intrinsic Value in MGM We believe the net asset value of MGM is at least $33 per share, indicating an approximately 50% further upside to intrinsic value above and beyond the 13% rise in the stock since our announcement of Board nominations and proposal to enhance shareholder value on March 17, 20152. We have utilized our extensive experience in evaluating real estate, lodging and gaming companies to arrive at what we believe is the intrinsic value of the company and there is broad agreement within the investment community based on our conversations that MGM is meaningfully undervalued. MGM's Credibility Issues Prior to our involvement, there was no evidence that the Board had recently thoroughly evaluated alternatives to unlock shareholder value. For example:
We are Concerned about the Board's Poor Stewardship We believe there are a host of reasons which indicate that the Board would benefit from shareholder-elected independent directors. Specifically we highlight the following tangible issues which we believe indicate that the Board would benefit from shareholder-elected independent directors:
The Lead Independent Director Should Be Beyond Reproach A board led by Lead Independent Director Roland Hernandez pressured one of our nominees, Richard Kincaid, to resign from the Vail Resorts, Inc. (NYSE:MTN (News - Alert)) ("Vail Resorts") Board of Directors. Roland Hernandez is currently MGM's Lead Independent Director and has been on the Board for 13 years, making it difficult for him, in our view, to be truly independent, or in a position to hold the combined Chairman and CEO accountable. We would also ask shareholders to consider Mr. Hernandez's background and most recent maneuver at Vail Resorts:
L&B Board Nominees: Highly-Qualified and Independent The Land and Buildings nominees will not only seek to ensure that the Company takes a clear-eyed assessment of the Land and Buildings REIT proposal, among others, but that the Board adopts a culture of accountability to shareholders. Given the substantial underperformance of MGM and the Board's lackluster response to this underperformance, we believe that the addition of our independent nominees would compel the Company to take the necessary steps to close its persistent and material discount to its potential valuation. Land and Buildings' slate of proposed nominees possess track records that speak for themselves:
Now is the Time to Unlock Value at MGM Land and Buildings has conducted extensive due diligence to understand the potential value and feasibility of its proposals to MGM. This has included consulting with leading legal advisors with extensive experience in the area of REIT conversions in an effort to propose a structure that would be cost and tax efficient. There are a number of factors that make now an ideal time for MGM to explore our proposals:
THE MARKET PRICE INCREASED SUBSTANTIALLY SINCE WE RELEASED OUR PROPOSAL - DRIVING UP THE COMPANY'S STOCK PRICE BY 13% AND CREATING $1.2 BILLION IN MARKET VALUE THE COMPANY'S RESISTANCE TO TAKING MEANINGFUL ACTION, HOWEVER, COULD CAUSE MUCH OF THAT VALUE CREATION TO ERODE We have been extremely disappointed by the lack of appropriate urgency and apparent unwillingness of the Board and Management to take meaningful action. This includes the Board's apparent decision to ignore for months our call to hire independent financial advisors to evaluate our proposals and other available options for the benefit of all shareholders. As a result of the Company's apparent inaction, we were compelled to do what the Board had not done, retain an independent financial advisor, Houlihan Lokey, to conduct a thorough strategic review of our proposed structure. Whether it is the proposal Land and Buildings has outlined, or a variation thereof, we believe it is important for the Land and Buildings nominees to be in the boardroom of MGM to ensure that all value creating ideas are evaluated. Vote FOR our Nominees on the GOLD Proxy Card Today As detailed above, we believe MGM has lacked the Board stewardship necessary to create long term shareholder value. Today, significant value is being trapped in MGM and we believe our Board nominees can help unlock that value. We believe the net asset value of MGM is $33 per share, indicating an approximately 50% further upside to intrinsic value. We believe strongly that our four candidates would help realized the intrinsic value for the benefit of all our fellow shareholders. Sincerely,
Jonathan Litt
LAND & BUILDINGS CAPITAL GROWTH FUND, L.P., LAND & BUILDINGS INVESTMENT MANAGEMENT, LLC AND JONATHAN LITT (COLLECTIVELY, "LAND & BUILDINGS") AND MATTHEW J. HART, RICHARD KINCAID AND MARC A. WEISMAN (TOGETHER WITH LAND & BUILDINGS, THE "PARTICIPANTS") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC (News - Alert)") ON APRIL 16, 2015 A DEFINITIVE PROXY STATEMENT AND ACCOMPANYING FORM OF PROXY CARD TO BE USED IN CONNECTION WITH THE PARTICIPANTS' SOLICITATION OF PROXIES FROM THE STOCKHOLDERS OF MGM RESORTS INTERNATIONAL (THE "COMPANY") FOR USE AT THE COMPANY'S 2015 ANNUAL MEETING OF STOCKHOLDERS (THE "PROXY SOLICITATION"). ALL STOCKHOLDERS OF THE COMPANY ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO THE PROXY SOLICITATION BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL INFORMATION RELATED TO THE PARTICIPANTS. THE DEFINITIVE PROXY STATEMENT AND AN ACCOMPANYING PROXY CARD HAVE BEEN FURNISHED TO SOME OR ALL OF THE COMPANY'S STOCKHOLDERS AND ARE, ALONG WITH OTHER RELEVANT DOCUMENTS, AVAILABLE AT NO CHARGE ON (News - Alert) THE SEC'S WEBSITE AT HTTP://WWW.SEC.GOV/. IN ADDITION, INNISFREE M&A INCORPORATED, LAND & BUILDING'S PROXY SOLICITOR, WILL PROVIDE COPIES OF THE DEFINITIVE PROXY STATEMENT AND ACCOMPANYING PROXY CARD WITHOUT CHARGE UPON REQUEST.
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