MGM Offers $4.65 Billion for Mandalay
Casino operator MGM Mirage launched a surprise $4.65-billion bid for rival Mandalay Resort Group late Friday -- a deal that would put the lion’s share of hotel rooms on the Las Vegas Strip under the control of billionaire financier Kirk Kerkorian.
MGM offered to purchase Mandalay for $68 a share in a cash transaction and assume about $2.8 billion in debt.
Both companies’ properties dominate the Strip, where Mandalay alone has about 15,000 hotel rooms. Besides its namesake casino, Mandalay also owns the Luxor and Excalibur. It has other properties in Nevada, as well as in three other states.
MGM, which is already the third-largest U.S. gaming company, would outstrip Caesars Entertainment Inc. and Harrah’s Entertainment Inc. to become No. 1 if the deal were consummated. MGM owns the MGM Grand, Las Vegas’ largest hotel, with 5,034 rooms. It also owns the Mirage and New York-New York casinos. Outside of Nevada, MGM has properties in three other states and Australia.
A merger would extend MGM, known for its high-end properties, into the lower- and middle-range casinos.
“The combination of these two great companies would provide Mandalay shareholders with a premium price for their shares as well as providing several strategic benefits to shareholders in MGM Mirage,” Terrence Lanni, chairman and chief executive of MGM Mirage, said in a statement.
The offer would give Mandalay shareholders a 13% premium over Friday’s closing price of $60.27.
Mandalay declined to comment except to say that it would “carefully evaluate” MGM’s proposal.
The move comes as Metro-Goldwyn-Mayer Inc., another Kerkorian-controlled company, continued negotiating its possible sale to Sony Corp. and several equity partners for about $5 billion in cash and assumed debt. Kerkorian owns about 74% of the Los Angeles-based studio.
Kerkorian, who turns 87 on Sunday, controls more than 53% of MGM Mirage, which is the result of a $4.4-billion merger with Steven Wynn’s Mirage Resorts Inc. in March 2000.
A merger would face antitrust scrutiny from state and federal regulators.
One Las Vegas gaming executive, who asked not to be identified, said the deal would probably require the combined companies to sell some properties.
MGM’s offer was announced after the stock market closed. During regular trading, Mandalay’s shares zoomed more than 10%, gaining $5.65, after announcing better-than-expected fiscal first-quarter results. MGM’s shares gained $1.50 to $46.03. Both trade on the New York Stock Exchange.
