Thursday, February 17, 2005
Copyright © Las Vegas Review-Journal

$7.9 BILLION DEAL: FTC clears casino buyout

MGM Mirage, Mandalay Group deal now faces gaming boards

Mandalay Bay and the MGM Grand are shown in Las Vegas Wednesday. The two casino companies are going to merge into one. Photo by John Locher.

MGM Mirage's $7.9 billion buyout of the Mandalay Resort Group was cleared by the Federal Trade Commission on Wednesday, paving the way for Nevada's gaming regulators to consider the matter next week during two special meetings in Las Vegas.

Completing the transaction by the end of March would create -- for the time being -- the world's largest casino company, with 28 properties in Nevada, Illinois, New Jersey, Michigan and Mississippi; 70,000 employees; and $6.5 billion in annual revenues.

In letters to attorneys for both companies, the FTC said it found no reason to halt the merger because of any concerns that the proposed merger would give the new company too much market clout in Las Vegas or any other jurisdictions.

The vote to close the agency's investigation into possible antitrust concerns was 5-0, said FTC spokesman Mitchell Katz.

"Upon further review of this matter, it appears that no additional action by the commission is warranted at this time. Accordingly, the investigation has been closed," wrote Donald Clark, commission secretary.

Executives from both MGM Mirage and the Mandalay Resort Group have expressed a desire to close the transaction in the first quarter of this year.

Nevada regulators' approval would constitute the final major hurdle. That's because industry observers believe that once Nevada signs off on the deal, other jurisdictions will follow suit.

"We are very pleased to learn that, after an extensive and detailed investigation, the FTC has unanimously approved our merger with Mandalay, citing no competitive concerns to the Nevada gaming industry," said Terry Lanni, MGM Mirage chairman and chief executive officer. "We now look forward to making the scheduled presentations before Nevada's Gaming Control Board and Gaming Commission next week."

Gaming Control Board Chairman Dennis Neilander has said FTC approval was needed before state gaming regulators would hear the matter. He said FTC officials had told him a federal resolution on the buyout would be reached this week.

"With a merger of this magnitude, it's our policy to await a recommendation from the FTC," Neilander said Wednesday. "We completed our investigation about a week ago, and we're ready to move forward on this issue."

The Gaming Control Board will meet at 10 a.m. Tuesday and the Nevada Gaming Commission is scheduled to hear the matter at 1:30 p.m. Thursday.

The control board will consider the merger with just two members, Neilander and Bobby Siller.

New control board member Mark Clayton, who will become part of the panel next week, said previously he would not take part in the discussions on the merger because of his current position as a corporate attorney for Caesars Entertainment, which is in the process of being bought out by Harrah's Entertainment.

With that merger, valued at $9.4 billion and expected to close by the end of June, Harrah's would surpass the new MGM Mirage as the gaming industry's largest company with an estimated $9.4 billion in annual revenues.

The transaction is also awaiting FTC approval, and the companies announced in January they were in "substantial compliance" with the FTC's requests.

The announcement of FTC approval of the MGM Mirage and Mandalay deal was made following the close of stock market trading Wednesday. MGM Mirage finished the day at $77.80, down 34 cents or 0.44 percent. Mandalay was off a penny at $70.62.

In a note to investors, JP Morgan gaming analyst Harry Curtis said a quick conclusion to the merger should boost shares in MGM Mirage.

"We believe that closing of the transaction will be positive for MGM Mirage's stock, because MGM Mirage can move quickly to drive revenue per occupied room higher while reducing duplicate overhead and marketing costs," Curtis wrote.

Once combined, MGM Mirage would own some of the Strip's best-known casinos, including Bellagio, MGM Grand, The Mirage, Mandalay Bay and Circus Circus. It also would control half of the boulevard's 74,424 rooms and about 40 percent of the slot machines.

Those figures will change once the 2,700-room, $2.5 billion Wynn Las Vegas opens April 28 and a 949-room tower expansion at Caesars Palace is available for occupancy later this year.

Mandalay Resort shareholders approved the merger with MGM Mirage in early December. A week later, Mississippi's three-member gaming commission unanimously signed off on the transaction, which covers two of the state's 29 casinos.

MGM Mirage is also trying to sell one of two Detroit casinos it would own after the merger to satisfy Michigan requirements. Previously, the company has stated it would sell the MGM Grand Detroit to avoid any antitrust issues in that state.

However, a report out of Detroit this week said Marian Ilitch, part-owner of the Mandalay Resort-controlled Motor City Casino, had made a $525 million offer to purchase the majority interest in that property.

The merger would give MGM Mirage additional undeveloped land on the Strip. In November, the company announced its intentions to build "Project CityCenter," a $3 billion to $4 billion project on 63 acres that would include a 4,000-room resort along with urban development.

In 2007, MGM Mirage hopes to open a hotel-casino in the Chinese enclave of Macau, as well as properties in the United Kingdom, which is exploring loosening its gaming laws.

MGM Mirage is also one of a host of American-based gaming companies expected to respond to a Singapore government request for proposals to build a gambling hall in the Asian island nation.