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Howard Stutz

Casino Company Merger Headed Over Final Hurdle

18 April 2005

Illinois gaming authorities were receptive to an MGM Mirage proposal over the management structure of a riverboat casino that could lead to the final regulatory approval necessary in the company's $7.9 billion buyout of the Mandalay Resort Group.

MGM Mirage executives met with the Illinois Gaming Board this week to discuss moving Mandalay's 50 percent ownership of the Grand Victoria into an escrow trust. A spokesman for the board said the issue could be presented for final approval as soon as Thursday.Advertisement

Action by Illinois regulators requires two meetings of the panel, and this week's hearing served as the initial presentation.

Under the plan, management of the boat would be assumed by the Pritzker family, which is Mandalay's partner in the Grand Victoria. The family also operates the Hyatt Hotel chain.

Approval of the ownership transfer would be enough to allow MGM Mirage to complete its buyout of Mandalay, which would give the company 28 casinos in five states with 75,000 employees, 95 percent based in Nevada.

While Illinois regulators would rule only on the escrow trust proposal, MGM Mirage would still be subject to a formal licensing by the state at a future hearing.

With 36,000 square feet of gaming space, the Grand Victoria, located about 40 miles northwest of Chicago in Elgin, may be the smallest piece of the entire merger puzzle.

MGM Mirage Chairman and Chief Executive Officer Terry Lanni said the company has the ability to close the transaction within two business days of resolution of all outstanding matters.

The buyout has already been approved by gaming regulators from Nevada and Mississippi and the Federal Trade Commission.

This week, Michigan gaming authorities approved the sale of Mandalay's ownership in the MotorCity Casino. The gaming hall, one of three in Detroit, was sold because MGM Mirage already owns Detroit's MGM Grand Casino, and Michigan law prohibits companies from owning more than one casino in the city.

MGM Mirage executives have said financing for the buyout is in place, which would include the purchase of $4.8 billion of Mandalay Resort Group stock at $71 a share and assumption of almost $3 billion in company debt.

Shares in MGM Mirage closed Friday at $70.67, down $2.83, or 3.85 percent.

Casino Company Merger Headed Over Final Hurdle is republished from