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MGM Board backs buyout bid, Mandalay considers it
17/06/04
By Peter Henderson and Tom Johnson
Los Angeles/New York - The board of
directors of MGM Mirage has backed a management plan
to buy Mandalay Resort Group for $4.8 billion and form the
largest casino operating company in the world., a source
familiar with the situation said Tuesday.
Mandalay's board was still meeting Tuesday
evening to consider the deal. If it approves the offer, the
companies are expected to make an announcement Wednesday
morning the person said.
However, there was no certainty about when
a decision would be made or announced.
Shares of both companies rose Tuesday in
anticipation of a merger, which MGM has said would
immediately boost profits. Mandalay shares have not yet hit
the proposed takeover price, however due to fears that the
deal might not pass muster with the Mandalay board or
antitrust regulators, analysts say.
A takeover of Mandalay would catapult MGM
to the top spot in the gambling world and a dominate role in
Las Vegas, where it would own a third of of the casinos on
the Las Vegas strip of megaresorts and about half the hotel
rooms.
MGM does not plan to divest any properties
in Las Vegas or nationally apart from one in Michigan, which
is required by local regulations, the person familiar with
the situation said.
REGULATORY OK SEEN LIKELY
Many analysts now expect MGM may be right
in thinking the deal will win approval from authorities.
Banc of America Securities' J. Cogan said that properties
near the Strip, such as the Hard Rock still compete.
The California tribal casino market rivals
Las Vegas in total size, giving MGM a strong positionto
argue before regulators that it would not dominate the
gambling market he said.
"If I had to bet a dollar today, I'd bet
they prevail," he said.
The deal would also give MGM, which caters
more to high-end gamblers, a stronger foothold in the market
for business people, since Mandalay last year opened the
largest privately owned convention center in the world and a
new hotel that has stayed full mid-week with conventioneers.
If state or federal regulators do force
some Las Vegas sales, Caesars Entertainment Inc. and
Harrah's Entertainment Inc. the current No. 1 and No. 2
casino companies by revenue, topped the list of potential
buyers.
MGM is the No. 3 player and Mandalay is
No. 4.
MGM has offered to buy its rival for $71
per share, or $4.8 billion, plus the assumption of $2.5
billion in debt and $600 million in convertible debt.
MGM originally offered $68 per share on
June 4 and Mandalay rejected the offer once, saying MGM
wanted an escape clause to exit the deal in 15 months for a
$100 million fee if regulators put up roadblocks.
MGM dropped that condition and raised its
price over the weekend, letting managements of the companies
agree on the main points of a deal, it said.
Shares of Mandalay edged up 28 cents to
$67.88 and MGM Mirage rose $1.30 to $49.50 on the New York
Stock Exchange on anticipation of a deal.
Read this entire article at: USA
Today
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