MGM Mirage Offers To Buy Mandalay Resort Group

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In a blockbuster deal that would merge two of the biggest gambling companies in the world, MGM Mirage offered to buy Mandalay Resort Group for about $7.65 billion on Friday.

MGM Mirage offered to purchase Mandalay Resort Group for $68 per share in a cash deal valued at about $7.65 billion, which would include assuming about $2.8 billion in debt.

"The combination of these two great companies would provide Mandalay shareholders with a premium price for their shares as well as providing several strategic benefits to shareholders in MGM Mirage," said Terri Lanni, chairman and CEO of MGM Mirage in Las Vegas.

Among the company's hotel-casinos on the Las Vegas Strip are The Mirage, Bellagio and MGM Grand.

The $68 per share offer would provide Mandalay shareholders with a 12.8 percent premium over Friday's closing stock price of $60.27, MGM Mirage said in a statement.

The Mandalay Resort Group's flagship property is its towering, gold glass Mandalay Bay hotel-casino on the south end of the Las Vegas Strip. It opened a nearly 2-million-square-foot convention center there in January 2003 and added a tower with 1,117 suites, called THEhotel, in December 2003.

Mandalay Resort Group said it had received the offer and "will carefully evaluate the proposal from MGM Mirage and will respond to MGM Mirage in due course. Mandalay does not intend to make any further comment on this matter until it is finally resolved."

A source close to the negotiations said MGM Mirage made "a friendly but unsolicited bid." Talks have been under way for the past few days, the source said.

MGM Mirage repeatedly has talked about growth opportunities, and Mandalay Resort Group fit the bill with its lucrative convention business and Las Vegas Strip properties, the source said.

The combined companies would allow MGM Mirage to capture a broad swath of the market in Las Vegas and establish it as the industry's top gambling company, surpassing both Caesars Entertainment and Harrah's Entertainment in revenues.

Any deal would need approval by the Securities and Exchange Commission and gambling regulators in Nevada and other states in which the two have casinos.

A potential stumbling block exists in Detroit, where the companies are allowed to own only a single casino. Mandalay owns MotorCity Casino and MGM Mirage has the MGM Grand Detroit.

MGM Mirage could overcome the hurdle by selling one of the two.

Marc Falcone, a Deutsche Bank gambling analyst in New York, said the offer took Wall Street by surprise.

"I don't think anyone would have ever anticipated this announcement," he said. "I think the biggest issue at hand is being able to assess the competitive position MGM Mirage would control in Las Vegas."

He added, "the price is a fair price for the assets."

MGM Mirage owns or operates 12 casinos in Nevada, New Jersey, Mississippi, Michigan and Australia, and has investments in two other resorts in Nevada and New Jersey. It has a 25 percent interest in British casino developer Metro Casinos Ltd.

Mandalay Resort Group owns and operates 11 casinos in Nevada and has about 15,000 rooms on the Strip. It has ownership in other properties in Nevada, Illinois and Michigan, and owns a hotel-casino in Tunica County, Miss.


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