Item 1.01 Entry into a Material Definitive Agreement.
On August 4, 2021, MGM Resorts International, a Delaware corporation (the “Company” or “MGM”) entered into a Master Transaction Agreement (the “Transaction Agreement”) by and among MGM Growth Properties LLC, a Delaware limited liability company (“MGP”), MGM Growth Properties Operating Partnership LP, a Delaware limited partnership (the “MGP LP”), VICI Properties Inc., a Maryland corporation (“Parent”), Venus Sub LLC, a Delaware limited liability company (“REIT Merger Sub”), VICI Properties L.P., a Delaware limited partnership (“Parent OP”) and VICI Properties OP LLC, a Delaware limited liability company (“New Parent OP”). The Transaction Agreement provides that, subject to the terms and satisfaction or waiver of certain customary conditions set forth therein, (i) MGP will merge with and into REIT Merger Sub, with REIT Merger Sub being the surviving entity (the “REIT Merger” and such surviving entity, the “REIT Surviving Entity”), (ii) following the REIT Merger, the REIT Surviving Entity will merge with and into MGP LP, with MGP LP being the surviving entity (the “Partnership Merger” and, together with the REIT Merger, the “Mergers”) and (iii) following the Partnership Merger and immediately following New Parent OP’s consummation of certain financing transactions on the date the Transaction (as defined below) closes (the “Closing Date”), New Parent OP will redeem a certain number of units of New Parent OP (the “New Parent OP Units”) held by MGM and/or its subsidiaries for an aggregate cash amount equal to $4.404 billion (the “Partial Redemption”). The Mergers and the other transactions contemplated by the Transaction Agreement are collectively referred to herein as the “Transaction.”
Pursuant to the terms and subject to the conditions and limitations set forth in the Transaction Agreement: (A) at the effective time of the REIT Merger, (i) the class B common share of MGP, no par value per share, owned by MGM, will automatically be cancelled for no consideration, (ii) each class A common share of MGP, no par value per share (a “class A common share”), issued and outstanding immediately prior to the effective time of the REIT Merger will automatically be cancelled, retired and converted into the right to receive 1.366 shares of common stock, par value $0.01 per share, of Parent (the “Parent Common Stock,” and such consideration, the “REIT Per Share Merger Consideration”) plus cash in lieu of fractional shares less any applicable tax withholdings and (iii) each limited partnership unit of MGP LP, all of which are held by the Company and certain of its subsidiaries, will automatically be canceled, retired and converted into the right to receive 1.366 units in New Parent OP and (B) upon the consummation of the Partial Redemption, a certain number of New Parent OP Units held by MGM and/or its subsidiaries (the “Redeemed Units”) will be redeemed for an aggregate redemption price of $4.404 billion resulting in MGM retaining an approximate 1% interest in New Parent OP.
Pursuant to the terms and subject to the conditions and limitations set forth in the Transaction Agreement, on the Closing Date, MGM Lessee, LLC, a subsidiary of MGM, will enter into an Amended and Restated Master Lease (the “Amended and Restated Master Lease”) with MGP Lessor, LLC, a subsidiary of Parent (“MGP Lessor”), pursuant to which properties owned by MGP Lessor, LLC will be leased to MGM Lessee, LLC for an initial total annual rent of $860 million (or in the event that the MGM Springfield property has not been acquired by MGP Lessor prior to the Closing Date, such total annual rent will be reduced by an amount equal to $30 million until the date the MGM Springfield property is included in and governed by the Amended and Restated Master Lease) and an initial term of 25 years, with three 10-year renewal options. Rent under the Amended and Restated Master Lease will escalate at a rate of 2.0% per annum for the first 10 years and thereafter at the greater of 2.0% per annum or the consumer price index, subject to a 3.0% cap. The Company will provide a guarantee of MGM Lessee, LLC’s obligations under the Amended and Restated Master Lease.
Pursuant to the terms and subject to the conditions and limitation set forth in the Transaction Agreement, on the Closing Date, MGM, certain of its affiliates that own New Parent OP Units immediately after the Partial Redemption and certain of their transferees (the “Protected Parties”) will enter into a Tax Protection Agreement (the “Tax Protection Agreement”) with Parent and New Parent OP, pursuant to which New Parent OP will indemnify the Protected Parties against a full or partial acceleration of any deferred tax liability for a period of 15 years (beginning on the Closing Date) incurred as a result of one or more actions described in the Tax Protection Agreement that may be taken by New Parent OP or its affiliates.
The consummation of the Transaction is subject to customary conditions, including among others: (i) approval of the Transaction Agreement, the REIT Merger and the other transactions contemplated by the Transaction Agreement by the affirmative vote of the holders of at least a majority of the voting power of the Outstanding Voting Shares of MGP (as defined in the Amended and Restated Limited Liability Company Agreement of the Company, as amended) which condition was satisfied by delivery of a written consent by MGM (the “MGM Written Consent”), (ii) the approval of the issuance of Parent Common Stock in the REIT Merger (the “Parent Stock Issuance”) by the affirmative vote of a majority of the votes cast at the meeting of Parent’s shareholders (the “Parent Shareholder Approval”), (iii) no temporary restraining order or other judgment, order or decree issued by any governmental authority prohibiting consummation of the Mergers or any other transactions contemplated in the Transaction Agreement and no law having been enacted by any governmental authority after the date of the Transaction
