The US$4.8 billion buyout of Mandalay Resort Group by MGM Mirage will have global implications for the gambling and convention markets, according to company executives who previewed an aggressive growth plan stretching from Las Vegas to Singapore.
Hours after both boards unanimously approved the biggest casino deal in history on Wednesday, Terry Lanni, chairman and chief executive officer of MGM Mirage, put competitors on notice that the gambling giant would not let the merger slow efforts to build new casinos around the world.
"With all of the additional resources we'll gain from this transaction, we'll be better able to compete across all segments of the gaming and leisure market," Lanni said in a conference call with analysts.
He said MGM Mirage was looking at opportunities to build casinos in Britain, Thailand, Singapore and Macau.
The terms of the agreement were a cash buyout of US$71 per share and the assumption of US$2.5 billion in Mandalay debt. It also includes about US$600 million in bonds that can be exchanged for company stock.
The agreement calls for a US$160 million breakup fee if the deal collapses, said Glenn Schaef-fer, Mandalay's president and chief financial officer.
Jim Murren, MGM Mirage's president and chief financial officer, said complete terms would be released within days, and he didn't envision any problems financing the blockbuster deal between the two Las Vegas-based companies.
Mandalay's executive management will help with the transition but will not stay on. MGM Mirage executives said most of Mandalay's other employees would be retained.
MGM Mirage executives said they expect to complete the transaction by the first quarter next year if antitrust issues don't interfere.
John Mulkey, a Bear Stearns gambling analyst in New York, said MGM Mirage will benefit in executing its expansion plans.
"We believe it's a good acquisition for them," Mulkey said. "Their size and brands would almost guarantee them a seat in any discussions for new gaming jurisdictions domestically or internationally."
Schaeffer said the two companies are a perfect fit with their diverse assets. Their combined potential is formidable, he said.
"The strategic aspect of this combination has worldwide implications," he said. "I think the combination of forces ... will bring forth a pretty exciting growth dynamic."
The transaction will give MGM Mirage revenues of about US$6.5 billion and control of 28 properties in Nevada, New Jersey, Illinois, Michigan and Mississippi. It will create the biggest gambling company in the world.
Caesars Entertainment and Harrah's Entertainment will drop a notch on the gambling ladder, taking the second and third spots respectively in total revenues.
In addition to 70,000 employees, MGM Mirage would boast having the fifth largest convention center in the US, at the Mandalay Bay hotel-casino in Las Vegas.
The combined companies would claim about half of the 72,000 hotel rooms on the Las Vegas Strip.
Many of the most famous casinos in the world, The Mirage, Bellagio, MGM Grand, Circus Circus, Luxor and Mandalay Bay, would fall under the new MGM Mirage corporate umbrella.
Lanni said there were three parcels on the Las Vegas Strip where MGM Mirage might build another hotel-casino. The biggest gambling market in the world is producing records profits for gambling companies.
"We are clearly bullish on Las Vegas and its potential," Murren said in a statement.
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