MGM Mirage plans to buy back 20 million shares

MGM Mirage said Wednesday it wants to buy back up to 20 million shares of the company's stock, a move analysts said may boost the casino operator's share price.

Investors have been waiting to see how MGM Mirage would use a payment of almost $2.5 billion the company received last month from Dubai World, the investment arm of the Persian Gulf state of Dubai. MGM Mirage sold Dubai World a 50 percent interest in the company's $7.8 billion CityCenter development as well as agreeing to other joint venture projects. MGM Mirage had said it would use of the proceeds from the Dubai transaction to pay down company debt.

After the Dubai deal was unveiled in August, MGM Mirage announced a joint- venture development with Kerzner Holdings on a casino project on the north end of the Strip, opened the $800 million MGM Grand Detroit in October, announced a planned $5 billion MGM Grand project in Atlantic City and said it would open the $1.2 billion MGM Grand Macau on Dec. 18.

"MGM Mirage has and will continue to have meaningful excess free cash flow with little project capital expenditures outside of Atlantic City, which we believe they should and will eventually joint venture," Bear Stearns gaming analyst Joe Greff said in a note to investors.

Shares have fallen about 15 percent in the past six weeks. On Oct. 10, shares of MGM Mirage reached a 52-week high of $100.50 on the New York Stock Exchange. The share price has tumbled since, but analysts thought Wednesday's announcement might give the company a lift. The company announced plan before trading opened Wednesday and the company's shares closed at $87.86, up $2.34, or 2.74 percent.

Going into Wednesday, MGM Mirage had 299.38 million shares outstanding.

CIBC World Markets gaming analyst David Katz told investors current interest rates make the share repurchase somewhat neutral to the company's balance sheet.

"Given the company's evolving leverage, we believe the likelihood of a lower average interest rate would make prospective repurchases more accretive," Katz said.

MGM Mirage said the company's board of directors authorized the stock repurchase. No time frame for the buyback was given and the purchases can be made through open market purchases, privately negotiated third-party transactions or other methods.

MGM Mirage said it had repurchased more than 5 million shares in the current quarter, which ends Dec. 31, leaving 420,000 shares outstanding under the previous share repurchase program approved in July 2004.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.