Saturday, June 12, 2004
Copyright © Las Vegas Review-Journal

JANE ANN MORRISON: Would-be merger of MGM-Mirage and Mandalay spelled trouble

MGM Mirage's desire to gobble up Mandalay Resort Group would have created a gaming behemoth that probably would have made money for stockholders, but I'm not convinced it would have been good for Southern Nevada, either politically or economically.

The proposed merger, which Mandalay rejected Friday as being too risky for its stockholders, would have placed one company in control of 33 casinos (18 in Southern Nevada) and nearly 80,000 employees.

It's a no-brainer: That kind of consolidation would affect Nevada politics.

In competitive races, a mammoth company can open doors by bundling donations from separate casinos and subsidiaries and funneling them to their candidate. Or it can close doors and encourage its vendors to do the same, essentially knee-capping a candidate.

"Instead of being the 900-pound gorilla, they're going to be the 2,000-pound gorilla, and I wouldn't want to get in a fight with them," said Paul Brown, who monitors campaign contributions to lawmakers for the Progressive Leadership Alliance of Nevada.

The Strip would control state politics, even more than it already does.

The economic ramifications worried me even more.

One company would set rates for half the rooms on the Strip; one company would have been the biggest employer; one company would have been the biggest customer for local vendors.

The Culinary Local 226 doesn't believe the proposed merger is a bad thing for the unions.

Wall Street reacted favorably.

But a lot of people were saying they thought the merger was a terrible idea, even before it was nixed.

Of course, they don't want to tick off MGM Mirage Chairman Terry Lanni, so they won't let me use their names.

One former gaming executive believes a merger is bad for customers because it contributes to the sameness of the industry and variety fades to monotony. "It's all the same corporate blanket; it's too many properties in the hands of the same management."

A Las Vegas businessman, who also requested anonymity, said it's not healthy to have one company control 50 percent of the rooms on the Strip.

"What happens if you have a confrontation with a casino boss at the TI? Does that mean you're eliminated from a job at the Mirage, the Bellagio?"

Yes, and the MGM Grand, Monte Carlo, New York-New York, Mandalay Bay, Luxor, Excalibur and Circus Circus as well.

Negotiating with a monstrously large company isn't real negotiating. Say the MGM Mirage decides it would rather pay $1 for light bulbs, rather than $1.25. The company can tell the local vendor, "We buy a million light bulbs. If you don't like it, we'll buy from out of state."

A friend in the gaming industry tried to help me find the positives in this yet-to-be approved merger.

Slot machine companies would be winners. They would be hired to create systems so that the slot cards can work at both Mandalay Bay Resort casinos and MGM Mirage casinos. They would make millions, and new jobs would be created for their companies.

An indirect benefit: If a sell-off was ordered of some older Mandalay properties that don't fit into the high-class image of MGM Mirage (such as Circus Circus or Excalibur), that provides an opportunity for a small or midsized company to buy one of those properties and grow. Such an owner might be inclined to put some money into improving those tired properties.

The closest parallel to that occurred in the 1960s when Howard Hughes started his Las Vegas casino buying spree, starting with the Desert Inn, then adding the Sands, the Castaways, the Silver Slipper and the Frontier.

When he tried to put the Stardust into his shopping cart, the federal government jumped in and said it was a mistake to let one man control so much of one town's economy. He still was allowed to buy the Landmark.

Today, Nevada's gaming regulators considering licensing must examine "whether acquisition would pose problems or create a monopoly."

But nothing says how big is too big.

For now, dealers need not live in fear of being fired and blackballed from working at most of the Strip properties.

Jane Ann Morrison's column appears Monday, Thursday and Saturday. E-mail her at jane@reviewjournal.com or call 383-0275.