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ACQUISITIONS AND DIVESTITURES | 9 Months Ended
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Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS AND DIVESTITURES | ACQUISITIONS AND DIVESTITURES LeoVegas acquisition. On May 2, 2022, the Company commenced a public offer to the shareholders of LeoVegas to tender 100% of the shares at a price of SEK 61 in cash per share. On September 7, 2022, the Company completed its tender offer and acquired 65% of the outstanding shares of LeoVegas and, at the completion of an extended acceptance period on September 22, 2022, acquired an additional 2% of outstanding shares, for an aggregate cash tender price of $370 million. During the tender offer period, the Company had acquired 31% of outstanding shares in open market purchases that had an acquisition-date fair value of approximately $172 million. As the Company’s previous 31% ownership interest was accounted for at fair value, no gain or loss was recorded upon consolidation. The remaining outstanding shares, with a fair value of approximately $11 million based upon the tender price, will be settled by the Company in cash in connection with squeeze-out proceedings. The acquisition provides the Company an opportunity to create a scaled global online gaming business. The Company recognized 100% of the assets, liabilities, and noncontrolling interests of LeoVegas at fair value at the date of the acquisition. The fair value of the acquired equity interests of LeoVegas was determined by the tender price and equaled $556 million, inclusive of cash settlement of equity awards. Under the acquisition method, the fair value was allocated to the assets acquired, liabilities assumed, and noncontrolling interests. T he Company estimated fair value using level 1 inputs, level 2 inputs, and level 3 inputs. The estimated fair values of the identified intangible assets were determined using methodologies under the income approach based on significant inputs that were not observable. The intangible assets include trademarks, which is an indefinite-lived intangible asset, and customer lists and technology, which are finite-lived intangibles that are amortized over each of their estimated useful lives of five years. Goodwill is primarily attributable to the profitability of LeoVegas in excess of identifiable assets as well as expected synergies and is not deductible for tax purposes. All of the goodwill was assigned to Corporate and other. The allocation of fair value is preliminary as of September 30, 2022 and is primarily open for the valuation of the acquired intangible assets and for income tax impacts, and may be adjusted up to one year after the acquisition. The following table sets forth the preliminary purchase price allocation (in thousands):
Cash and cash equivalents | $ | 93,407 |
Receivables and other current assets | 36,872 |
Technology | 126,162 |
Trademarks | 166,356 |
Customer lists | 140,843 |
Goodwill | 238,040 |
Other long-term assets | 19,181 |
Accounts payable, accrued liabilities, and other current liabilities | (118,302) |
Debt | (104,439) |
Other long-term liabilities | (39,564) |
Noncontrolling interests | (2,861) |
| $ | 555,695 |
The operating results for LeoVegas are included in the consolidated statements of operations from the date of acquisition. LeoVegas’s net revenue for the period from September 7, 2022 through September 30, 2022 was $31 million and operating loss and net loss were $3 million and $4 million, respectively. 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. The estimated fair values of the identified intangible assets were determined using methodologies under the income approach based on significant inputs that were not observable. The 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. As of September 30, 2022, the purchase price allocation is preliminary, however, the Company does not expect material changes to the value of the assets acquired or liabilities assumed. The following table sets forth the preliminary purchase price allocation (in thousands):
Cash and cash equivalents | $ | 80,670 |
Receivables and other current assets | 94,354 |
Property and equipment | 120,912 |
Trademarks | 130,000 |
Customer lists | 95,000 |
Goodwill | 1,289,468 |
Operating lease right-of-use-assets, net | 3,404,894 |
Other long-term assets | 23,709 |
Accounts payable, accrued liabilities, and other current liabilities | (145,136) |
Operating lease liabilities | (3,401,815) |
Other long-term liabilities | (1,570) |
| $ | 1,690,486 |
The operating results for The Cosmopolitan are included in the consolidated statements of operations from the date of acquisition. The Cosmopolitan’s net revenue for the period from May 17, 2022 through September 30, 2022 was $465 million and operating income and net income were each $57 million. 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 was determined by the transaction price and equaled $4.25 billion. The carrying value of the Company's equity method investment was less than its share of the fair value of CityCenter at the acquisition date, resulting in a net gain of $1.6 billion upon consolidation, which was recognized as "Gain on consolidation of CityCenter, net" on the consolidated statements of operations. 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 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. The following table sets forth the purchase price allocation (in thousands):
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 |
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. Pro forma results of operations for the LeoVegas acquisition have not been included because it is not material to the consolidated results of operations.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
| (In thousands)
Net revenues | $ | 3,416,072 |  |  | $ | 3,208,590 |  |  | $ | 9,958,088 |  |  | $ | 7,762,826 |
Net income (loss) attributable to MGM Resorts International | (576,830) |  |  | 226,231 |  |  | 1,203,246 |  |  | 37,454 |
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 MGP OP 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 to remove The Mirage and 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 September 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 to remove Gold Strike Tunica and 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 September 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 September 30, 2022 are as follows:
| The Mirage |  | Gold Strike Tunica
| (In thousands)
Assets |  |  |
Cash and cash equivalents | $ | 18,636 |  |  | $ | 21,020 |
Accounts receivable, net | 19,102 |  |  | 2,404 |
Inventories | 5,371 |  |  | 978 |
Prepaid expenses and other | 8,139 |  |  | 1,786 |
Property and equipment, net | 25,755 |  |  | 20,269 |
Goodwill | 10,249 |  |  | 40,523 |
Other intangible assets, net | 3,095 |  |  | 5,700 |
Operating lease right-of-use assets, net | 1,322,219 |  |  | 511,090 |
Other long-term assets, net | 7,046 |  |  | 1,406 |
Assets held for sale | $ | 1,419,612 |  |  | $ | 605,176 |
Liabilities |  |  |
Accounts payable | $ | 10,773 |  |  | $ | 5,914 |
Other accrued liabilities | 65,924 |  |  | 17,738 |
Other long-term obligations | 6,666 |  |  | 2,538 |
Operating lease liabilities | 1,328,710 |  |  | 515,777 |
Liabilities related to assets held for sale | $ | 1,412,073 |  |  | $ | 541,967 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
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