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Phil Hevener

Mergers and Acquisitions: Other Deals in Works?

14 July 2004

MGM Mirage is continually looking for new acquisition and expansion possibilities although it prefers dealing with some gaming jurisdictions more than others, the company's chairman said in a recent interview.

While Terry Lanni said his company's recent proposal to buy Mandalay Resort Group for $7.9 billion was part of a "disciplined, on-going review" of other companies, other sources who wished to remain anonymous said Harrah's Entertainment and Caesars Entertainment, both Las Vegas-based companies, have been in MGM Mirage's sights at various times in the past.

Lanni said his company's search for acquisition targets is based on criteria that have not changed much over the years.

"We have limited ourselves to jurisdictions we think are most reasonable ... the ones that are not going to kill the goose that lays the golden egg. We've thought about the states we are comfortable with.

"Clearly we are very comfortable with Nevada. We are very comfortable with Mississippi," he said.

In addition to its recent offer to buy Mandalay, MGM Mirage emerged four years ago when MGM Grand purchased Steve Wynn's Las Vegas-based Mirage Resorts.

The gaming executive said local attitudes like Mississippi Gov. Haley Barbour's helps explain his company's preference for operating in that state.

While sharing the keynote duties at the Southern Gaming Summit in Biloxi-Gulfport earlier this year, Barbour told Lanni that he would rather see $100 million invested in MGM Mirage's Beau Rivage resort than have the same amount paid directly to the state in the form of taxes.

"The result will be a better return for the state of Mississippi. You'll have construction jobs. You'll have increased permanent employment," Lanni quotes Barbour as telling him.

Tax issues spurred some "differences" in New Jersey a year ago when Gov. James McGreevey considered increasing gaming taxes to a greater degree than executives such as Lanni saw as reasonable.

However, "it looks as though New Jersey is going to be a stable environment," Lanni said.

But beyond those three states, Lanni is not happy with what he sees.

"When you leave those jurisdictions it gets a little dicey . . . what with proposed entry fees of 50 million or a hundred million and taxes of 50-60 percent or more," he said.

Read between the lines of Lanni's recent comments and it is easy to believe the company may not want to keep Mandalay's half of its joint venture casino in Elgin, near Chicago.

Lanni's not tipping his hand yet, noting only that the Illinois situation "will be reviewed."

In addition to his own company's continuing review of possible acquisitions, Lanni expects additional consolidation moves in the gaming industry.

"We believe that in the U.S. gaming is a mature industry and mature industries tend to grow through consolidation. I don't know if you will see a raft of consolidation efforts, but I think you will see some."

Mergers and Acquisitions: Other Deals in Works? is republished from