Dubai investors raise stake in MGM

Dubai World has plans to submit a nominee for MGM Mirage's board of directors after increasing its investment in the gaming giant, according to filing Friday with the U.S. Securities and Exchange Commission.

The investment arm of the Persian Gulf state Dubai, where gambling is illegal, announced it had increased its holdings to 6.5 percent from 4.9 percent by purchasing 5 million shares for $424 million, or $84.80 per share.

Dubai World now controls 19.5 million of the 299.4 million outstanding shares in the Las Vegas-based gaming company.

The purchase was from the Lincy Foundation, a California-based nonprofit organization founded by MGM Mirage controlling investor Kirk Kerkorian.

The crossing of the 5 percent control threshold will give Dubai World the right to designate a nominee for election to serve on MGM Mirage's board of directors, according to the terms of the company stock purchase agreement signed in August.

"The purchase is in line with Dubai World's previously announced plans," MGM Mirage spokesman Gordon Absher said. "We're pleased in the confidence their purchase expresses in our company."

Dubai World already faces licensing from Nevada gaming regulators because of its 50 percent purchase of CityCenter for $2.7 billion this year.

Bill Lerner, a gaming analyst with Deutsche Bank, said in a note to investors that surpassing the 5 percent stake threshold could trigger licensing investigations in New Jersey.

MGM Mirage co-owns the Borgata with Boyd Gaming Corp. in Atlantic City and announced plans in October to develop a $5 billion MGM Grand there.

The latest acquisition price is just above the $84 per share cash offer made by Dubai World during the summer in an attempt to buy 14.2 million shares from stockholders.

Shareholders holding only 348,903 shares, 0.1 percent of outstanding shares, agreed to sell at that time.

The investment arm also spent nearly $1.2 billion to acquire 14.2 million shares directly from MGM Mirage in October.

Dubai World's investments in MGM Mirage go beyond stock holdings.

In addition to the CityCenter investment, Dubai World entered a second joint venture agreeing to partner with the gaming giant and Kerzner International Holdings to develop 40 acres on the southwest corner of the Strip and Sahara Avenue.

Dubai World and Kerzner will contribute a combined $600 million cash for a 25 percent equity investment each.

MGM Mirage shares climbed 81 cents, or 0.96 percent, Friday to close at $85.06 on the New York Stock Exchange.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or (702) 477-3893.