Bally Manufacturing Corp. said Saturday that it will acquire the MGM Grand in Las Vegas and Reno in a deal worth more than $440 million.
Bally, which owns Bally's Park Place hotel-casino in Atlantic City, said it plans to rename the hotels the Bally Grand after taking over sometime during the early part of next year.
"With the acquisition of the MGM Grand Las Vegas and Reno hotel-casinos, Bally clearly emerges as one of the world's leading leisure time companies," said Robert R. Mullane, chairman and chief executive officer of Bally.
The Chicago-based Bally also owns 230 health clubs and seven amusement parks and supplies state lottery equipment, video games and slot machines.
"We think Bally's acquisition of MGM Grand is in the best interest of our company and our shareholders," said Alvin Benedict, chairman and chief executive officer of MGM Grand. "Our operations will be an exceptionally good fit with theirs."
Kirk Kerkorian, the majority owner of MGM Grand Hotels Inc., will retain the rights to the MGM Grand name under the agreement. A company executive said Kerkorian may develop hotel-casino properties under the name, but the agreement bars any Nevada hotel-casinos for three years.
The sales agreement is subject to approval of MGM Grand stockholders, financing and obtaining gaming and other governmental approvals, Bally said.
Under terms of the agreement, public holders of MGM Grand's stock would receive $18 for each share of common stock and $14 for each share of preferred stock.
About 70% of MGM Grand common and preferred stock is owned by Kerkorian and Tracinda Corp., a company wholly owned by Kerkorian. They would receive $12.24 per common share and $14 per preferred share, Bally said in a news release.
Bally would pay more than $440 million for all common and preferred stock.
As part of the transaction, Kerkorian will guarantee that MGM Grand will recover at least $50 million from MGM Grand's impending lawsuit for property damage insurance recoveries relating to the 1980 fire at the Las Vegas hotel.
$380 Million in Revenue
The two MGM properties had revenues of about $380 million during the last fiscal year and reported room occupancies averaging about 85%. The Las Vegas resort has 3,000 rooms and the Reno property has more than 2,000 rooms.
The MGM Grand in Las Vegas was built in 1973 at a cost of more than $100 million. It was followed by the Reno resort, which opened in 1978.
The sale occurs almost exactly five years after a disastrous fire struck the MGM Grand in Las Vegas on Nov. 21, 1980, killing 87 people. The resort reopened seven months later after a $50-million refurbishing effort.