Let's make a deal
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Let's make a deal
MGM Mirage acquires Mandalay, Caesars sells LV Hilton
After months of relative calm, the Las Vegas gaming market heated up recently with the announcements of two major casino deals.
The first-a blockbuster in all respects-occurred when officials with Mandalay Resort Group announced that they would accept MGM Mirage's bid of $71 a share in cash to acquire the Las Vegas-based gaming company. The deal totals $7.9 billion in value, including MGM Mirage's assumption of $2.5 million in Mandalay debt and $600 million of convertible debentures.
Assuming the deal passes through all regulatory channels, it would become the largest merger in the history of the gaming industry, supplanting MGM Grand's $6.4 billion buyout of Mirage Resorts in 2000.
MGM Mirage raised its bid from $68 a share to $71 a share after Mandalay rejected an initial proposal. Mandalay executives said the rejection wasn't so much a matter of the price, but the amount of risk that MGM Mirage would have assumed should any deal between the gaming companies fall through.
"The terms of the MGM Mirage proposal asked Mandalay shareholders to bear a far disproportionate share of the risk," Mandalay President and CFO Glenn Schaeffer said in a statement. "It is not in the best interest of Mandalay shareholders to agree to a deal that gives MGM control over when it closes."
MGM Mirage had stipulated a 15-month option to cancel the agreement. In that time, Mandalay would have been prohibited from making any financial or strategic moves in the gaming industry. If the deal did not close, MGM Mirage would have paid Mandalay a $100 million break-up fee.
The agreed upon merger would create the world's largest gaming company, with 29 casinos throughout the United States, including 12 Las Vegas Strip properties. The combined companies would also own two of the three Detroit casinos.
Meanwhile, as MGM Mirage decided to greatly expand its casino empire, Las Vegas-based Caesars Entertainment took a step in the opposite direction when it completed its $280 million sale of the Las Vegas Hilton to Colony Capital. Caesars officials have said they will use the proceeds from the sale to pay down their company's $4 billion worth of debt.
Several gaming analysts have indicated this may not be the last property Caesars will attempt to offload as it re-examines its company portfolio.
"I think there are more it would like to sell, especially in the mid-South and non-Las Vegas properties in Nevada," Fulcrum Global Partners analyst Joe Greff told the Las Vegas Review-Journal.
In a statement from Caesars, spokesman Robert Stewart noted the sale was beneficial to both parties.
"It helps us continue the strategy of paying down debt and focusing exclusively on the flagship operations on the Las Vegas Strip-Caesars Palace, but also the Flamingo, Paris Las Vegas and Bally's," he said. "But it's also great for Las Vegas because Colony Capital is committed to investing in the property, and we're sure it'll have a great impact not only for the Las Vegas Hilton, but for the Las Vegas market," Stewart said.
Colony is expected to begin renovating the Las Vegas Hilton and begin targeting on business and convention visitors, given its location adjacent to the Las Vegas Convention Center.
Colony is one of the few private investment firms licensed in gaming. The firm owns Resorts International in Atlantic City, N.J., and is a partner in Accor Casinos in Europe. The company was reported to have shown interest in acquiring other Las Vegas properties in the past, including the bankrupt Aladdin Hotel & Casino.
