MGM Mirage Restructuring Begins

LAS VEGAS -- A day after getting federal antitrust approval of its $7.9 billion buyout of the Mandalay Resort Group and just days away from an anticipated go-ahead from Nevada gaming authorities, the corporate structure of the new MGM Mirage is already beginning to take shape.

The transaction will give MGM Mirage control of 28 properties in five states, including eight of the nine major resort casinos on the west side of the Strip between Spring Mountain Road and Russell Road, as well as the MGM Grand.

A team of executives from MGM Mirage is expected to unveil an organizational layout to the Gaming Control Board on Tuesday morning that will help explain where the 17 properties now controlled by Mandalay Resorts will fall into the MGM Mirage scheme.

The Federal Trade Commission gave its blessing to the buyout Wednesday and, pending Nevada regulatory approval, the companies hope to close the deal by the end of March.

Some properties will be placed under the authority of MGM Grand, while others will be part of Mirage Resorts.

"Our structure is to have presidents at each property," MGM Mirage spokesman Alan Feldman said. "The names of those presidents probably won't be made available at the hearing."

One name that has filtered out is former MGM Grand President Bill Hornbuckle, who sources said will become president of Mandalay Bay once the merger is completed. Hornbuckle is president of MGM Mirage Europe.

MGM Mirage has already moved Bobby Baldwin, who oversees Mirage Resorts, into a development position for Project CityCenter, a $4.7 billion project on 66 acres south of Bellagio that would include a 4,000-room resort along with urban development, such as high-rise residential and commercial.

It's unclear who, if any, of Mandalay Resorts' corporate management team members would remain once the merger closes.

The control board will meet on the matter Tuesday, followed by the Nevada Gaming Commission on Thursday afternoon.

New Jersey gaming regulators are expected to approve the transaction shortly. Mississippi gaming authorities approved the deal in December.

In Illinois, the approval process is up in the air because the governor has yet to appoint a new member to the state's gaming regulatory board. Several options concerning Mandalay's casino in Elgin, Ill., could be implemented so the buyout could be completed.

In Michigan, one of the companies' two Detroit casinos --either the MGM Grand Detroit or the Motor City Casino -- will have to be sold to satisfy state gaming requirements.

Gaming analysts expect the transaction to be completed within the company's time frame, saying the FTC's approval moved the process along at a faster pace.

"While not unexpected, we believe that this is an important event, removing some of the concern or overhang that investors may have had regarding the closing of the deal," Deutsche Bank gaming analyst Marc Falcone said in a note to investors. "We think the FTC approval was an important catalyst and the transaction should progress on schedule."

MGM Mirage shares closed Thursday at $78.50, up 70 cents, or 0.9 percent. Mandalay Resort Group shares closed at $70.73, up 11 cents, or 0.16 percent.

Bear Stearns gaming analyst Joe Greff increased his year-end price target on MGM Mirage stock to $93 a share, up from $85, following the FTC approval.

In a note to investors, Greff said the combination of the two companies will produce a strong operator.

"We feel very comfortable with our consensus estimate based on our expectation of ongoing strength on the Las Vegas Strip, which is 80 percent of the company's total cash flow, the benefits from the Mandalay Resort Group acquisition, and an attractive development pipeline," Greff wrote.