VICI Properties Inc [NYSE: VICI] revealed that it has inked an agreement to acquire MGM Growth Properties [NYSE: MGP]. The Master Transaction Agreement has been inked with MGM Resorts International [NYSE: MGM]. MGM Resorts is the controlling shareholder of MGM Growth Properties.
VICI will spend $17.2 billion, encompassing nearly $5.7 billion of debt for the acquisition of MGP. It has been disclosed that VICI will have a projected enterprise value of $45 billion. It will strongly reinforce the presence of VICI as the largest experiential net lease REIT while also enhancing VICI’s strategic goals of portfolio development and expansion.
Additionally, concurrent with the execution of the deal, VICI Properties will ink a revised and restated triple-net master lease with MGM Resorts. The lease will have an initial total yearly rent of $860.0 million. Moreover, it also encompasses MGP’s expected purchase of MGM Springfield, and a preliminary term of 25 years, with three 10-year tenant renewal options.
The deal was authorized by the Board of Directors of each of MGM Resorts, MGP, and VICI Properties. The parties anticipate the deal to finalize in the first half of 2022. The deal execution depends on traditional closure conditions, regulatory approvals, and authorization by the stockholders of VICI Properties.
As per the Master Transaction Agreement, MGP Class A shareholders will obtain 1.366 shares of newly issued VICI stock in exchange for each Class A share of MGP. The fixed exchange ratio signifies a decided price of $43.00 per share of MGP Class A shares. It is based on VICI’s trailing 5-day volume-weighted average price of $31.47 as of July 30, 2021. Moreover, it signifies a 15.9% premium to MGP’s execution stock price on August 3, 2021.
Furthermore, this deal is incremental to AFFO per share. It also improves portfolio quality, size, and scale at a substantial discount to replacement cost. The deal opens substantial new index eligibility for MGP Class A shareholders. At the same time enabling investors in the merged company to profit from index rebalancing, given the substantially larger size, and strong setting for S&P 500 inclusion and improved trading liquidity.