Two bidders submit final offers for M Resort

Sources confirmed a Bloomberg News Service report Thursday that two entities -- regional casino giant Penn National Gaming and Los Angeles-based private equity firm Leonard Green & Partners -- have submitted competing offers to acquire the debt in M Resort.

Two people, who asked not to be identified because the talks are private, said Leonard Green's bid is in partnership with the Marnell family. The Marnells built the 390-room hotel-casino, which opened in March 2009 at the far southern end of the Las Vegas Valley.

If Penn National is successful, the transaction could lead to a change in ownership.

M Resort is operated by Anthony Marnell III, who built the hotel-casino at a cost of $1 billion -- $300 million for the 93-acre site at the corner of Las Vegas Boulevard South and St. Rose Parkway and $700 million for construction.

According to people with knowledge of the sale, M Resort is set to be sold for a fraction of its cost. The resort owes about $700 million to HBOS, formerly the Bank of Scotland, which was acquired by London-based Lloyds Banking Group.

The Review-Journal reported in August that Blackstone Group, a global investment firm, solicited bids for the property. According to gaming sources, 12 companies, partnerships or individuals expressed interest in M Resort.

Marnell and his family, including his father, casino construction pioneer Tony Marnell Jr., made one of the offers for the debt.

Bloomberg reported that the competing bidders submitted final offers after multiple auction rounds, according to people who asked not to be identified because the negotiations are private.

Representatives of Blackstone and Lloyds declined to comment. A spokesman for Leonard Green didn't respond to a request for comment.

"While Penn maintains interest in establishing a presence in Las Vegas, the company doesn't comment on rumor or speculation," Joe Jaffoni, a Penn spokesman, said Thursday.

A spokeswoman for M Resort did not return a phone message seeking comment.

Penn National, based in Wyomissing, Pa., operates racetracks and 16 casinos in U.S. cities other than Las Vegas and Atlantic City. In June, Penn National received a Nevada gaming license after acquiring 1 percent of a small Nevada slot machine manufacturer.

The move cleared the path for the company to move quickly and buy a Las
Vegas-based resort.

According to its website, Leonard Green & Partners manages about $9 billion of equity capital. Its investments include fitness club operator Equinox and Whole Foods Market Inc.

M Resort was funded through an equity investment by the Marnell family, loans from the Bank of Scotland, and $160 million investment by MGM Resorts International.

A year ago, MGM Resorts wrote down its investment on M Resort when the casino was just a few months old. Company CFO Dan D'Arrigo said the accounting adjustment was taken because of the economic climate.

M Resort opened at the height of the economic downturn following a year-and-a-half building process. The operators had been banking on planned nearby housing communities and businesses to fuel the customer base. The sour economy halted or canceled those projects.

M Resort opened to large crowds enticed by a massive marketing effort. The heavy business forced M Resort to hire 250 more workers to its 1,800-person work force. When the newness wore off, business slowed.

Lately, there have been other changes, both in personnel and cosmetic.

In July, former Station Casinos executive Jody Lake was named general manager, replacing Joseph Magliarditi, who left to become CEO of the Hard Rock Hotel. Last month, M Resort closed the Red Cup Cafe, the casino's 24-hour coffee shop, which will be replaced by Hash House A Go Go. The restaurant was a change in business strategy. When M Resort opened, Marnell said in interviews the property would operate its nine restaurants in order to better control pricing.

Review-Journal reporter Howard Stutz and Bloomberg News Service contributed to this report.