MGM Resorts International sent a letter to shareholders Monday urging shareholders to vote for company director candidates for the May 28, 2015 election and not the four proposed Land and Buildings Investment Management candidates. Land and Buildings Investment Management is a USA hedge fund company based in Connecticut. The voting in May could influence MGMs business structure in more ways than one. According to the letter, replacing key board members with four people who do not have the same experience would not be wise or in the best interest of the shareholders. It could also damage the strength and complementary skills the board is constructed of now, stated MGM Resorts in the proxy filing.
A proposal to make MGM China Holdings and its properties into two separate businesses was proposed last month. A real estate investment trust or REIT would be necessary. The second company would be run as a hotel management business. MGM Resorts International currently holds a 51% share in the Macau operator MGM China Holdings.
MGM Resorts’ letter states the analysis to support the REIT and separate hotel management company is filled with errors. It makes financial and tax assumptions that are not clear. In some cases, according to MGM Resorts, the information is factually incorrect or not supported with proper evidence.
Jonathan Litt, the hedge fund manager, insists the MGM Resorts stock is undervalued and by splitting the company into two the value would increase.
News reports began to surface in late March that MGM Resorts was being told by Land and Buildings Investment Management, that they should convert their land holdings to a REIT or real estate investment trust. The hedge fund, Land and Buildings Investment Management, then requested some of their candidates be added to the board of MGM.
MGMs current board members sent out a missive to shareholders on Friday March 20, 2015 asking them to decline any signature or proxy accepting the hedge fund company. Land and Buildings Investment Management has also suggested the company have a separate hotel and REIT as well as to monetise MGM China Holdings Ltd where the MGM Cotai is currently being built. Right now the hedge fund has less than 1% of MGM shares, so it is not enough for controlling interest. However, if the make up of the board of directors changes appreciably, so could the balance of power.