MGM Selling Ohio Casino to Clairvest for $546 Million
MGM Resorts International (NYSE: MGM) announced on Thursday that it is selling the MGM Northfield Park racino's operational rights to Clairvest Group-controlled private equity funds for $546 million in cash.
MGM, a company based in Las Vegas, stated that it anticipates earning $420 million after taxes. The first half of next year is when the deal is expected to close. The venue's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the 12 months ending June 30, 2025, is represented by 6.6 times the purchase price.
"This is an excellent result for MGM Resorts and demonstrates consistency in driving transaction multiples at meaningful premiums over where MGM Resorts currently trades. The divestiture underscores MGM Resorts’ exceptional financial stewardship, delivering substantial value well beyond the original acquisition price,” said MGM CFO Jonathan Halkyard in a statement.
MGM is making a respectable profit on Northfield Park, with $420 million in after-tax earnings. In 2018, the Ohio casino was purchased by MGM Growth Properties, a real estate investment company (REIT) that had previously been separated from the casino operator. MGM rebranded the arena under the MGM moniker after purchasing the operating rights for $275 million a year later.
The Ohio Casino Sale Puts an End to an Old Rumor
An era comes to an end with the news of Northfield Park's sale. In the first quarter of 2024, there were rumors circulating about what would happen to the Ohio site and MGM Springfield in Massachusetts, but no deals were made until today.
Although it's unclear if MGM Springfield, Massachusetts's first traditional casino that debuted in August 2018, is still for sale, management have previously stated that the establishment has underperformed in terms of earnings. The seller seems to have made a significant deal in Ohio.
“The sale multiple of 6.6x represents the highest transaction multiple for a single asset regional opco since COVID. When applying MGM’s cost of capital to the rent ascribed with this transaction, the wholeco valuation would approximate 10x,” said Jefferies analyst David Katz in a note to clients today.
Another reason to find the deal positive is that it demonstrates that purchasers are still interested in local gaming assets even though interest rates are still high, which is seen to be impeding the consolidation of the casino industry.
Additionally, MGM will save some money
MGM's sale of Northfield Park isn't merely a windfall. When the transaction is completed, the operator will also save some money.
The operator's yearly lease payments to the REIT will be lowered by $54 million as part of the sale of MGM's master lease arrangement with VICI Properties (NYSE: VICI), the owner of the real estate in Northfield Park.
In 2022, VICI paid $17.2 billion to acquire MGM Growth Properties, which included the Ohio racino's real estate holdings.
