Author Home Author Archives Search Articles Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Related Links
Related News
Recent Articles
Rod Smith

MGM Mirage Considering Keeping Circus Circus

24 June 2004

LAS VEGAS -- MGM Mirage, once its $7.9 billion buyout of Mandalay Resort Group is done, is interested in keeping and maybe redeveloping Circus Circus rather than selling it off as has been speculated, MGM Mirage President Jim Murren said.

"We're not interested in selling Circus Circus. We're very bullish on Las Vegas -- the whole valley. We're committed to seeing this valley evolve to an even better destination," he said.

Murren said MGM Mirage is interested in taking advantage of Las Vegas' rapidly growing convention and business travel industry, and it believes the 36-year-old Strip property can be managed and redeveloped to fit that niche.

Furthermore, he said the redevelopment of the north end of the Strip around Fashion Show mall has become an inevitability, especially with the planned opening of Wynn Las Vegas in April and the increasing interest in the Las Vegas gaming market.

"The inevitable redevelopment of the Stardust, Riviera, Sahara and Frontier will be great for Las Vegas. Certainly, Circus Circus has to be a candidate for (redevelopment) as well, and we intend to be part of it," Murren said.

He said MGM Mirage is also interested in holding onto the other hotel-casinos and real estate it will pick up if its deal to buy Mandalay is completed, and developing or redeveloping resorts where appropriate, rather than selling off properties.

MGM Mirage also will acquire vacant land across the Strip from Luxor and south of the Mandalay Convention Center, in addition to picking up the Mandalay Bay, Luxor, Excalibur and Circus Circus resorts through its purchase of Mandalay Resort Group.

Murren labeled unfounded widely circulated reports that MGM Mirage is interested in selling Circus Circus once the merger is completed, explaining it only intends to sell one of the two casinos the new company will own in Detroit because of the laws in Michigan.

Meanwhile, MGM Mirage is focusing on completing its merger with Mandalay Resort Group by March 31, the deadline set in the final sales agreement and merger plan recently filed with the federal Securities and Exchange Commission.

Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm, said the buyout agreement now on file with the SEC includes mainly standard conditions, and it should be possible for MGM Mirage to meet the tight deadline.

If not, Greff said he is confident both companies would agree to an extension, especially if any stumbling blocks involved getting last-minute approvals from regulators.

Eric Hausler, gaming analyst for Susquehanna Financial Group, also sees no problems with the timeline, adding that if both Boyd Gaming Corp.'s merger with Coast Casinos and Harrah's Entertainment's purchase of Horseshoe Gaming close next week as expected they will have been done in less time than anticipated.

Murren said the "outside date" for completing the deal is realistic, especially since his company completed its buyout of Mirage Resorts in just 87 days after the final agreement was reached.

"More is involved here because there are more (gaming) jurisdictions involved," but it should be possible to close the buyout sooner than (March 31)," he said.

University of Nevada, Las Vegas professor and casino industry expert Bill Thompson said MGM Mirage has experience with closing major buyouts and is free of ethical problems, so the major questions for regulators should involve antitrust issues.

"(And) the questions about monopoly and concentration of power, considering what is happening on the national scene, should be easy to answer," he said.

Documents filed with the SEC also confirm a $160 million breakup fee provision, to compensate MGM Mirage if the deal does not close because Mandalay accepts a new offer.

Murren said the provision was important to completing the agreement because MGM Mirage believed it will be doing most of the work and, as the buyer, wanted to be compensated if the sale derailed.

He said breakup fees are usually about 3 percent of the equity involved in the deal, as this provision is, and can range from 1 percent to 1 1/2 percent on the low side to as high as 4 percent to 4 1/2 percent on the high side.

Hausler said the breakup fee was important because MGM Mirage wanted to make sure its shareholders were protected in the event the sale does not close.

The merger agreement also makes clear that there are no built-in protections for either companies' current workers, although Murren said MGM Mirage will be sensitive to worker-related issues.

"Actions speak louder than words," he said.

"We will go to great lengths to make Mandalay workers feel very comfortable and part of the process. The concerns workers had before were unfounded, and any concerns would be unfounded now."

The agreement also includes no protections for Mandalay's executives, but assigns them the mission of doing everything possible to make sure the buyout closes as quickly as possible.

"And they've indicated that's what they want to do. These are the people who built this company and take great pride (in it)," Murren said.

"They're not the type of people who'd just walk away. We know them very well and are sure they won't walk away. We've already started the process of figuring out the best way to put the two (companies) together, and we need their help," he said.

MGM Mirage Considering Keeping Circus Circus is republished from