When billionaire Tilman Fertitta offered $17.6 billion to take Caesars Entertainment private, industry observers viewed it as a bold move by a longtime casino operator seeking control of one of gaming’s largest companies.
Less than one week later, another billionaire made an even bigger bet.
Media mogul Barry Diller’s People Inc. proposed a roughly $18 billion acquisition of MGM Resorts International, a move that, if completed, would remove the largest operator on the Strip from public markets.
Neither transaction is finalized, and both proposals must navigate months of due diligence and secure approvals from gaming regulators in Nevada and dozens of other jurisdictions before they can close. Caesars has also established a special committee to evaluate Fertitta’s proposal, while MGM has not publicly endorsed Diller’s unsolicited offer.
Taken together, however, the deals represent something larger than two high-profile acquisitions.
If approved, they would remove two of the gaming industry’s most recognizable companies from Wall Street, ending years of quarterly earnings scrutiny while placing billions of dollars in new acquisition debt on their balance sheets. The transactions also continue a broader trend of gaming companies abandoning public markets after years of consolidation, following recent take-private deals such as Golden Entertainment and International Game Technology.
Economists say the shift could fundamentally change how the companies make decisions, invest in their properties and compete for customers, though not necessarily in the same ways.
More than just a sale
Although the proposals differ in size and structure, both are examples of leveraged buyouts, or LBOs.
In a traditional acquisition, a buyer pays for a company primarily with cash or stock. Leveraged buyouts rely heavily on borrowed money.
Rather than financing an acquisition outright, buyers rely heavily on borrowed money, with the acquired company’s future cash flow helping repay much of the debt over time. The acquired company typically assumes much of that debt after the transaction closes.
The strategy can amplify returns for investors if the company continues generating strong cash flow. But it also leaves the business with significant debt obligations during economic downturns or periods of slowing growth.
Those tradeoffs are particularly significant in Las Vegas, where tourism spending has moderated after years of post-pandemic growth while borrowing costs remain elevated.
“I think what I’m watching here is what the new ownership is signaling about the strength of the gaming market in general and where we are in the cycle,” said Andrew Wood, director of UNLV’s Center for Business and Economic Research.
Las Vegas has remained near 40 million annual visitors for years, while inflation-adjusted gaming revenue has largely plateaued, Wood said. That does not necessarily indicate weakness, but it does suggest the Strip has matured into a market where future growth may require different strategies than simply attracting more gamblers.
Instead, casino operators are increasingly relying on entertainment, sports, conventions and digital gaming to generate new revenue.
“The industry is … needing a bit of a shake-up,” Wood said.
Freedom from Wall Street
The biggest change may not be financial. It may be philosophical.
Public companies answer to shareholders every three months. Executives spend significant time preparing earnings reports, responding to analysts and defending short-term financial performance.
Private companies face no such obligation.
“When they go private, they’re not subject to quarterly reports,” said Stephen Miller, research director at CBER. “They can look more into the longer run in terms of their planning. They don’t have to meet every quarter’s certain expectation.”
That flexibility could allow management to pursue investments that may take years to pay off rather than focusing on the next earnings report.
Diller alluded to that philosophy in announcing his proposal, saying MGM’s leadership has built “the world’s premier gaming, hospitality and entertainment company” and that private ownership would allow management to continue executing its long-term strategy away from the pressures of public markets.
Wood believes those comments reveal an important distinction between the two proposals.
With MGM, he sees investors expressing confidence in the company’s existing direction.
“They are still convinced that their strategy is the right strategy, but they need space from public markets,” Wood said.
Caesars, however, presents a different picture.
Two companies, two paths
Unlike MGM, Caesars already carries substantial debt and must make approximately $1.4 billion in annual lease payments to Vici Properties after selling much of its real estate in previous transactions.
Adding acquisition debt could increase pressure to streamline operations, refinance existing obligations or divest assets, Wood said.
“It wouldn’t surprise me if you see some streamlining and some assets reduced off their balance sheet,” he said, emphasizing that any prediction remains speculative. “Caesars, a couple years from now, might look a little different than it looks today.”
MGM, by contrast, appears more likely to continue pursuing its existing strategy while benefiting from the flexibility private ownership provides, he said.
“I get the sense there is more confidence that the current strategy will work given time,” said Wood.
That distinction reflects more than company-specific circumstances. It also reflects today’s economic environment.
Interest rates remain significantly higher than they were for much of the past decade, making debt more expensive. At the same time, consumer spending has begun to split between higher-income households that continue traveling and more budget-conscious visitors who have reduced discretionary spending.
Wood said MGM’s portfolio of luxury resorts positions it well to capitalize on that higher-end demand.
Caesars, with a larger mix of mid-market and value-oriented properties, may face greater challenges generating the cash flow necessary to comfortably service additional debt if lower-income consumers continue pulling back.
What guests might notice
The effects of private ownership may not be immediately visible to visitors.
Casino floors will still operate. Hotel rooms will still be cleaned. Shows will continue.
Over time, however, guests could notice changes.
Private ownership gives companies greater freedom to introduce new amenities, experiences and long-term investments without worrying about how those decisions affect the next quarterly earnings report, Miller said.
“They can be innovative in the sorts of new services they offer,” he said.
But the opposite also remains possible.
“The downside… the corporation may be interested in trying to raise revenue by parking fees and resort fees, and those could go up,” said Miller.
Similarly, non-management-level employees likely would see little immediate change because existing labor contracts remain in place.
Longer term, however, Miller said companies could pursue organizational restructuring or technological investments that reduce management positions or automate some functions.
A vote of confidence
For all the discussion surrounding debt loads, restructuring and regulatory approvals, both economists say the bigger story may be what these proposals reveal about Las Vegas itself.
For much of the past year, investors have questioned slowing visitation, softer consumer spending and whether rising prices have made the Strip less attractive.
Yet within days of one another, two billionaire investors independently decided the city’s largest casino operators were worth a combined $35.6 billion.
“They’re not investing to lose money,” Miller said. “They’re trying to earn money.”
Wood reached a similar conclusion.
“Competition and more investment signals that there is still a belief in several businesses here that Vegas is a good bet,” he said.
Whether those bets ultimately reshape Caesars, MGM or the broader resort corridor remains years away.
For now, economists say the proposed buyouts offer something more immediate: a significant vote of confidence that, despite a changing tourism landscape, major investors still believe Las Vegas’ best days lie ahead.
Contact David Danzis at ddanzis@reviewjournal.com or 702-383-0378. Follow @AC2Vegas_Danzis on X.