By KIMBERLY PIERCEALL, Associated Press
MGM Resorts International is urging shareholders of the casino-resort company to ignore an investment firm's proposal suggesting the company be converted into a real estate investment trust to boost stock value.
The company filed its definitive proxy statement with shareholders on Monday ahead of its May 28 annual meeting encouraging votes for MGM's board nominees, 11 incumbents, and not for those nominated by the investment firm Land and Buildings.
Land and Buildings is directly asking shareholders in its own proxy statement to elect four other directors to the board and has suggested MGM convert itself into a real estate investment trust and spin-out its hotels into a lodging corporation to increase shareholder value. A real estate investment trust is a company that owns and operates income-producing real estate.
Land and Buildings owns less than 1 percent of the company's outstanding shares.
In a letter to shareholders and in a filing with the Securities and Exchange Commission, MGM says it had been evaluating and would continue to study a real estate investment trust structure. It called Land and Buildings' proposal seriously flawed.
"MGM is in a strong position today as a result of the effective implementation of the Board's long-term strategic plan. The Company has delivered above industry average returns to shareholders and is well positioned for future growth," the company wrote in a letter. " We have and will continue to actively evaluate, with the assistance of external advisors, all strategic options for the company including a REIT conversion in light of MGM's corporate strategy, the economic environment, and the interplay between the two. Changing the MGM Board now would undermine its effectiveness, independence and diversity and is not necessary to ensure a current and comprehensive evaluation of strategic options."
Land and Buildings said Monday that it was disappointed in MGM's unwillingness to consider its proposal and the firm had hired a financial adviser to review its suggestions.
It says the company's stock price could be worth $33 to $55 a share under its plan. MGM Resort's stock price closed at $22.55 a share last week and was trading $22 mid-day Monday.
"If we get to $33 without having to convert to a REIT, maseltov," said Land and Buildings founder Jonathan Litt in a conference call weeks ago to discuss the proposal.
Land and Buildings tried to propose something similar with Las Vegas Sands Corp. in 2012. But the casino-hotel company run by billionaire Sheldon Adelson didn't sign on, either.
Land and Buildings has pointed to other casino companies proposing or already trying real estate investment trust structures.
Caesars Entertainment Corp. has proposed splitting its operating division, currently in chapter 11 bankruptcy, into a real estate investment trust with one entity owning the real estate and another leasing it.
Penn National Gaming spun out a real estate investment trust, renaming it Gaming and Leisure Properties, in 2012.