Stay informed with the
NEW Casino City Times newsletter!
In a quest to complete its proposed $7.9 billion acquisition of the Mandalay Resort Group during the first quarter of 2005, MGM Mirage announced Friday it plans to sell its Detroit casino and keep that city's Mandalay-owned casino.
MGM Mirage and Mandalay run two of the three casinos in the Detroit market and, under Michigan law, one of the properties will have to be sold before the merger can be approved. Initially, MGM Mirage, when announcing plans for its merger, said Mandalay Resort's MotorCity Casino would be sold.
Those plans seemed to change Friday.
The company stated it was "considering various strategic alternatives" in regards to the MGM Grand Detroit. Investment bankers have been exploring proposals to sell MotorCity, but offers and inquiries are starting to float in for the MGM property instead.
"There are at least six interested buyers for MGM Grand Detroit, and it's really going to come down to whether or not the partners are going to want sell out," Deutsche Bank gaming analyst Marc Falcone said, estimating the price for the sale would be in the neighborhood of $1.2 billion to $1.3 billion. "A deal has to be in place by the time the merger is completed, and they've got a few months to make a decision which way they want to go."
MGM Mirage's announcement comes a day after Mandalay Resort Group announced record third-quarter earnings, citing increased operating cash flow of $35.5 million despite an increase in the state's gaming tax that took effect Sept. 1. Mandalay President and Chief Financial Officer Glenn Schaeffer said the MotorCity Casino earned an average win of $383 per day on each of the property's 2,500 slot machines.
The Detroit properties are similar -- MGM Grand is 75,000 square feet with 2,700 slot machines and 80 table games, while MotorCity is a four-story facility with 70,000 square feet of gaming. The difference, said Falcone, is that a buyer would have to build a permanent facility on the MGM site, while the MotorCity Casino allows for expansion.
"MGM Grand Detroit and MotorCity are both great properties with consistently strong operating results and terrific growth prospects," MGM Mirage Chairman and Chief Executive Officer Terry Lanni said in a statement. "We initially expected that we would dispose of Mandalay's majority interest in MotorCity. However, since making that initial determination we have been approached by several parties concerning the possible sale of MGM Grand Detroit and we have decided to explore this alternative.
"If such a transaction were to occur, we would maintain Mandalay's interest in MotorCity and look forward to working closely with Mandalay's partners and the city of Detroit to develop and enhance that property."
Mandalay Resort's stake in MotorCity is 53.5 percent, which MGM Mirage would purchase.
The record earnings announcement fueled speculation that the merger would be completed within the two companies' stated time frame. On Friday, shares of Mandalay Resort Group closed at $70.19, up 50 cents, or 0.72 percent; MGM Mirage shares rose $2.84, or 4.68 percent, to close at $63.54.
Copyright GamingWire. All rights reserved.