ACQUISITIONS AND DIVESTITURES

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

The Cosmopolitan acquisition. On May 17, 2022, the Company acquired 100% of the equity interests in the entities that own the operations of The Cosmopolitan for cash consideration of $1.625 billion plus working capital adjustments for a total purchase price of approximately $1.7 billion. The acquisition expands the Company’s customer base and provides a greater depth of choices and experiences for guests in Las Vegas.

The Company recognized 100% of the acquired assets and assumed liabilities at fair value at the date of the acquisition. Under the acquisition method, the fair value was allocated to the assets acquired and liabilities assumed in the transaction. The Company estimated fair value using level 1 inputs, level 2 inputs, and level 3 inputs. As the transaction was recently consummated on May 17, 2022, the allocation of fair value for substantially all of the assets and liabilities is preliminary as of June 30, 2022, and may be adjusted up to one year after the acquisition.

The following table sets forth the preliminary purchase price allocation (in thousands):


Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	80,670
Receivables and other current assets	98,006
Property and equipment	122,419
Trademarks	130,000
Customer lists	95,000
Goodwill	1,284,309
Operating lease right-of-use-assets, net	3,404,894
Other long-term assets	23,709
Accounts payable, accrued liabilities, and other current liabilities	(145,350)
Operating lease liabilities	(3,401,815)
Other long-term liabilities	(1,570)
	$	1,690,272

The estimated fair values of the intangible assets were determined using methodologies under the income approach based on significant inputs that were not observable. The identified intangible assets include trademarks, which is an indefinite-lived intangible asset, and customer lists, which is amortized over its estimated useful life of seven years. Goodwill, which is deductible for tax purposes, is primarily attributable to the profitability of The Cosmopolitan in excess of identifiable assets as well as expected synergies. All of the goodwill was assigned to the Company’s Las Vegas Strip Resorts segment.

The operating results for The Cosmopolitan are included in the accompanying consolidated statements of operations from the date of acquisition. The Cosmopolitan’s net revenue for the period from May 17, 2022 through June 30, 2022 was $151 million and operating income and net income were $18 million and $18 million, respectively.

CityCenter acquisition. On September 27, 2021, the Company acquired Infinity World’s 50% ownership interest in CityCenter for cash consideration of $2.125 billion. Prior to the acquisition, the Company held a 50% ownership interest, which was accounted for under the equity method. Through the acquisition, the Company obtained 100% of the equity interests and therefore consolidated CityCenter as of September 27, 2021. The fair value of the equity interests of CityCenter was determined by the transaction price and equaled $4.25 billion.

On September 28, 2021, the Company sold the real estate assets of Aria (including Vdara) for cash consideration of $3.89 billion and entered into a lease agreement pursuant to which the Company leases back the real property. The Company classified the real estate assets as held for sale as of the acquisition date and accordingly measured the real estate assets at fair value less costs to sell, as reflected in the table below. See Note 9 for discussion of the lease.

The Company recognized 100% of the assets and liabilities of CityCenter at fair value at the date of the acquisition. Under the acquisition method, the fair value was allocated to the assets acquired and liabilities assumed in the transaction. The Company estimated fair value using level 1 inputs, level 2 inputs, and level 3 inputs.

The following table sets forth the purchase price allocation (in thousands):


Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	335,396
Receivables and other current assets	106,417
Property and equipment - real estate assets held for sale	3,888,431
Property and equipment	323,093
Trademarks	180,000
Goodwill	1,397,338
Other long-term assets	13,923
Accounts payable, accrued liabilities, and other current liabilities	(201,093)
Debt	(1,729,451)
Other long-term liabilities	(64,054)
	$	4,250,000

The fair value of the acquired indefinite-lived trademarks was determined using methodologies under the relief from royalty method based on significant inputs that were not observable. The goodwill is primarily attributable to the profitability of CityCenter in excess of identifiable assets, of which approximately 50% of the goodwill is deductible for income tax purposes. All of the goodwill was assigned to the Company’s Las Vegas Strip Resorts segment.

Unaudited pro forma information - CityCenter and The Cosmopolitan acquisitions. The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the Company’s acquisition of its controlling interest of CityCenter had occurred as of January 1, 2020 and the acquisition of The Cosmopolitan had occurred as of January 1, 2021. The pro forma information excludes the gain on consolidation of CityCenter and does not reflect transactions that occurred subsequent to acquisition, such as the Aria real estate sale-leaseback transaction or the repayment of CityCenter’s assumed debt. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of the indicated date.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Net revenues	$	3,422,277	$	2,685,073	$	6,542,015	$	4,554,236
Net income (loss) attributable to MGM Resorts International	1,781,930		167,176		1,780,076		(188,776)

VICI Transaction. On April 29, 2022, VICI acquired MGP in a stock-for-stock transaction. MGP Class A shareholders received 1.366 shares of newly issued VICI stock in exchange for each MGP Class A share outstanding and the Company received 1.366 units of VICI OP in exchange for each Operating Partnership unit held by the Company. The fixed exchange ratio represents an agreed upon price of $43 per share of MGP Class A share to the five-day volume weighted average price of VICI stock as of the close of business on July 30, 2021. In connection with the exchange, VICI OP redeemed the majority of the Company’s VICI OP units for cash consideration of $4.4 billion, with the Company retaining an approximate 1% ownership interest in VICI OP that had a fair value of approximately $375 million. MGP’s Class B share that was held by the Company was cancelled. Accordingly, the Company no longer holds a controlling interest in MGP and deconsolidated MGP upon the closing of the transactions. Further, the Company entered into an amended and restated master lease with VICI as discussed in Note 9. The lease between the Company and VICI BREIT Venture for the real estate assets of Mandalay Bay and MGM Grand Las Vegas remained unchanged.

In connection with the transactions, the Company recognized a $2.3 billion gain recorded within “Gain on REIT transactions, net.” The gain reflects the fair value of consideration received of $4.8 billion plus the carrying amount of noncontrolling interest immediately prior to the transactions of $3.2 billion less the carrying value of the assets and liabilities and accumulated comprehensive income derecognized of $5.7 billion. The major classes of assets and liabilities derecognized are as follows:


	(In thousands)
Cash and cash equivalents	$	25,387
Income tax receivable	5,486
Prepaid expenses and other	128
Property and equipment, net	9,250,519
Investments in and advances to unconsolidated affiliates	817,901
Operating lease right-of-use assets, net	236,255
Other long-term assets, net	3,991
Total assets	$	10,339,667

Accounts payable	$	1,136
Accrued interest on long-term debt	68,150
Other accrued liabilities	4,057
Deferred income taxes, net	1,284
Long-term debt, net	4,259,473
Operating lease liabilities	336,689
Total liabilities	$	4,670,789

The Mirage. On December 13, 2021, the Company entered into an agreement to sell the operations of The Mirage to an affiliate of Hard Rock for cash consideration of $1.075 billion, subject to certain purchase price adjustments. Upon closing, the master lease between the Company and VICI will be amended and restated to reflect a $90 million reduction in annual cash rent. The transaction is expected to close during the fourth quarter of 2022, subject to certain closing conditions, including, but not limited to, the receipt of regulatory approvals. The closing condition that the VICI Transaction is consummated or terminated was resolved upon the closing of such transaction and, accordingly, the asset group is classified as held for sale as of June 30, 2022.

Gold Strike Tunica. On June 9, 2022, the Company entered into an agreement to sell the operations of Gold Strike Tunica to CNE for cash consideration of $450 million, subject to certain purchase price adjustments. Upon closing, the master lease between the Company and VICI will be amended and restated to reflect a $40 million reduction in annual cash rent. The transaction is expected to close during the first quarter of 2023, subject to certain closing conditions, including, but not limited to, the receipt of regulatory approvals. The asset group is classified as held for sale as of June 30, 2022.

The Mirage and Gold Strike Tunica are not classified as discontinued operations because the Company concluded that the sales are not a strategic shift that have a major effect on the Company’s operations or its financial results and they do not represent a major geographic segment or product line.

The major classes of assets and liabilities classified as held for sale as of June 30, 2022 are as follows:


	The Mirage		Gold Strike Tunica
	(In thousands)
Assets
Cash and cash equivalents	$	17,989	$	19,242
Accounts receivable, net	22,386		1,722
Inventories	4,661		950
Prepaid expenses and other	6,680		1,284
Property and equipment, net	25,861		16,481
Goodwill	10,249		40,523
Other intangible assets, net	3,095		5,700
Operating lease right-of-use assets, net	1,329,337		513,670
Other long-term assets, net	7,024		1,413
Assets held for sale	$	1,427,282	$	600,985

Liabilities
Accounts payable	$	10,525	$	5,335
Other accrued liabilities	66,421		17,826
Other long-term obligations	8,248		3,508
Operating lease liabilities	1,330,013		515,544
Liabilities related to assets held for sale	$	1,415,207	$	542,213