MGM Resorts International (MGM): Icahn Up To Something…Bigger Than Herbalife?

What’s Icahn’s next move?

It’s rare that investors get to invest alongside a world-class activist shareholder who owns a majority stake in any firm. Luckily, Tropicana is tiny – today’s stock prices suggest a market cap of just over $400 million.

The current valuation is unlikely to be the price at which Icahn exits, though. Seeing as Icahn has a control position, his next move will likely follow in the footsteps of several multi-billion casino sales he’s participated in during his rise to the top of the activist investing food chain. Icahn has a knack for selling off casinos – he sold American Casino & Entertainment Properties for $1.3 billion in 2007.

In the worst case scenario, Icahn will make a bid to take it private. Given that he only needs to acquire about 30% of the total outstanding equity, the price tag would come at $120 million assuming no premium to the current trading price. Icahn could easily pay up with the more than $250 million Tropicana holds in cash.

In a best case scenario, Icahn will be ready to make a deal. MGM Resorts International (NYSE:MGM) is a potential suitor, a company with a $6 billion market cap and the financials capable of making a deal.

Synergies would undoubtedly come to fruition, sweetening an acquisition. MGM Resorts International (NYSE:MGM) already owns resorts and casinos in Mississippi, Detroit, and Aruba, and Tropicana’s positions in similar, non-destination locales plus a resort play in Aruba would make for a good combination. MGM Resorts International (NYSE:MGM) also holds a 50% stake in the Grand Victoria, a small casino in Illinois.

For MGM Resorts, a company which has focused on repaying acquisition debt from the boom years of the 2000s and adding bolt-on growth to existing casinos, Tropicana is an easy add-on. Any acquisition would be immediately accretive to MGM Resorts International (NYSE:MGM), giving it more real estate against which it can borrow cheaply and providing an exit route for Tropicana investors.

When Carl Icahn wants to make a move, he certainly will. Expect Icahn to start shopping around his prized hidden asset.

The article Forget Herbalife – Icahn Is up to Something Bigger in Casinos originally appeared on Fool.com and is written by Jordan Wathen.

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