Issue 234
March 07 - 13, 2005
Volume 5
page 2
 

State Regulators Voice Concerns:
MGM-Mandalay Deal Ok'd

As reported by the Las Vegas Review-Journal

While it was clear from the outset of Thursday's Nevada Gaming Commission hearing that MGM Mirage's $7.9 billion buyout of the Mandalay Resort Group was going to be approved, state regulators wanted to spell out their concerns about the anti-competitive aspects of the transaction more stringently than the Federal Trade Commission.
After a more than four-hour hearing that resulted in a 5-0 vote in favor of the merger, commission Chairman Peter Bernhard was satisfied regulators made their point.

"I viewed the FTC analysis as the beginning of our analysis," Bernhard said of the government agency's decision earlier this month not to challenge the merger. "We had to go further and look at the best interests of Nevada. Even if it met federal antitrust standards, we still had to make the independent judgment that it was in the best interest of the state based on the criteria of our regulations."

Once the buyout is completed, MGM Mirage will encompass 28 casinos in five states with 75,000 employees, 95 percent of whom are based in Nevada.

On the Strip, the company will own 12 casinos, including eight of the nine major resorts on the west side of the Las Vegas Boulevard between Spring Mountain Road and Russell Road.

The pointed questioning by gaming commissioners of MGM Mirage executives and attorneys as to whether or not the merger would stifle competition on the Strip brought the company's controlling shareholder, Kirk Kerkorian, to the podium.

The 88-year-old Kerkorian, who began MGM Mirage when he built the 5,000-room MGM Grand in 1993, said the same questions were asked in 2000 when he negotiated the buyout of Mirage Resorts to form the current company.

Normally a spectator during such hearings, Kerkorian told the gaming commission that one company couldn't hold back development in Las Vegas.

"In the last 4 1/2 years, Nevada has grown rapidly and there has been more interest worldwide," Kerkorian said. "I have to believe the same thing will happen again."

In a brief interview with the Review-Journal following his remarks, Kerkorian said Steve Wynn's planned April 28 opening of the $2.5 billion Wynn Las Vegas, is proof casino development will continue.

"The point I was trying to make was that the same questions were asked when we purchased Mirage," Kerkorian said. "Certainly, everything kept exploding and I don't think any one merger is going to hold back Las Vegas. They are going to still keep coming and still keep building."

MGM Mirage President and Chief Financial Officer Jim Murren cited the company's sale of the Golden Nugget to Poster Financial Group a year ago, the recent resale of the downtown casino to Landry's Restaurants, and last year's purchase of the Las Vegas Hilton by Colony Capital as proof new competition will continue to enter the marketplace.

Commissioner John Moran Jr., said the FTC's approval didn't mean all the questions had been answered. He said the gaming commission was more concerned about the impact the merger would have on other Nevada casinos.

"We had to go further and not just be a rubber stamp of the FTC," Moran said.
Gaming commission members said the financial data provided by MGM Mirage showed the company's commitment to the state.

After its merger with Mirage Resorts, the company said it spent $1.739 billion in capital expenditures for its Nevada properties between 2000 and 2004. Company executives said those expenditures would continue, including the $4.7 billion expected to be spent on the 66-acre Project CityCenter on the Strip.

"I felt this particular application showed this company's commitment to the state of Nevada and showed their responsibility in the past with their track record following their last merger," Bernhard said.

During the hearing, it was disclosed the purchase of Mandalay Resort Group would give MGM Mirage additional acres of undeveloped land with Strip access, including 22 acres south of Mandalay Bay, 15 acres on the east side of Strip across from Luxor, 27 acres north of Circus Circus, and 33 acres behind New York-New York and Monte Carlo.

MGM Grand Chairman and Chief Executive Officer Terry Lanni said after the hearing he hopes the purchase will be able to close in about two weeks once two remaining issues are cleared.

MGM Mirage needs to complete the sale of one of its two Detroit-area casinos in order to satisfy Michigan gaming law, and it must place Mandalay's Illinois casino into an escrow trust because that state doesn't have a full complement of gaming regulators to rule on the matter.

Once the merger is completed, Lanni said the company will release a list of management changes for various casinos. He said during the hearing that Renee West, president of the company's three properties in Primm, would move to a yet-to-be named Strip casino and become the first woman to be president of a Strip property.

Lanni also attempted to ease the concerns of Mandalay Resort Group employees about the future.

While key corporate executives are expected to leave, property employees won't be affected.

He said Mandalay employees will retain seniority and not be required to reapply for their positions. Also, health insurance and other benefits will remain status quo until MGM Mirage managers can assess both companies' benefit packages.

"Eventually we will look at what we offer and they offer and implement best practices," Lanni said. "We just ask the employees to judge us by what we did before. In some cases, they may have better practices."

Lanni also reiterated MGM Mirage has no plans to sell off pieces of the Mandalay Resort Group.

"We spent a great deal to ensure that the Federal Trade Commission did not require us to sell anything and it's not our intent to sell any property at this time," Lanni said. "But as a publicly traded company, we have a responsibility that if someone were to make an offer to us, we have to give consideration to that proposal. It would be the prudent thing to do and our shareholders would expect that."
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Lakes Entertainment, Inc. Announces Gaming Site Approval
in Vicksburg, Mississippi

Minneapolis, Minnesota - Lakes Entertainment, Inc.today announced that its request for gaming site approval with respect to its proposed casino location in Vicksburg, Mississippi has been granted by the Mississippi Gaming Commission. Lakes plans to develop the project on an approximately 160 acre site on the Mississippi River, located on Magnolia Road in Vicksburg, Warren County, Mississippi. Lyle Berman, Chairman and CEO of Lakes stated, "We are very excited about our proposed project in Vicksburg. We look forward to building and operating a first class facility that will enhance and grow the market. Our site is strategically located near Highway 61 to provide easy access for our guests."

Tim Cope, President and CFO of the Company added, "We plan to open an operation consisting of approximately 1,500 slot machines, 45 table games, a 250 room hotel and an enclosed guest parking facility. Our next steps are to work with the Army Corps of Engineers on site planning, complete the site development process and obtain the necessary development and construction financing. We look forward to opening by early 2007."

Lakes Entertainment, Inc. currently has development and management agreements with five separate Tribes for one new casino operation in Michigan, two in California, one in Texas and one in Oklahoma. Additionally, the Company owns approximately 64% of WPT Enterprises, Inc, a separate publicly held media and entertainment company principally engaged in the development, production and marketing of gaming themed televised programming including the World Poker Tour television series, the licensing and sale of branded products and the sale of corporate sponsorships.

First slots licenses could be by December

Harrisburg, Pennsylvania - Members of the state gambling board said Thursday they hope to issue the first slot-machine licenses to racetracks by as early as December, meaning that parlors could be up and running by the end of 2006.

The state Gaming Control Board will have to complete major tasks before then, such as writing the regulations to govern the licensing process, and hiring most of the board's staff, including an executive director.

By law, the board must first issue licenses to slot-machine manufacturers and distributors and casino suppliers at least three months before it can issue the licenses to racetracks.

If the board can license manufacturers, suppliers and distributors in September, as planned, it could issue the first slots licenses in December, members said.

"It's a work in progress," said board member Mary DiGiacomo Colins.

"It's nothing etched or fixed," she said.

Board members cautioned that unexpected delays in hiring staff or installing an internal computer network could throw off their proposed timeline by as much as months.

The initial batch of slots licenses would be strictly for horse racing tracks.

The board is authorized to issue 14 licenses to operate slots parlors. Each one will cost $50 million.

Seven of the licenses are earmarked for racetracks, most of which are already operating, while the locations of the other parlors have yet to be selected.

The 8-month-old gambling law set aside two of those licenses for sites in Philadelphia and one for a Pittsburgh site.

Board chairman Tad Decker said it will take longer to choose the seven non-track locations, but that he has no specific timeline at this point.

"You can only do so many things at once," he said.

Mike Jeannot, the vice president of The Meadows, a suburban Pittsburgh track, said Thursday his track won't be able to get a loan to build a gambling parlor until a slots license is issued. After that, he said, he expects the track's slots parlor would open within a year.

The state's other racetracks are Pocono Downs near Wilkes-Barre, Penn National Race Course near Harrisburg and Philadelphia Park in Bensalem.

Two other tracks, in Chester and near Erie, are licensed, but not yet built.

The state Harness Racing Commission has yet to issue a racing license for the track that will qualify for the last slots license.

Kenny Chesney

Mandalay Bay Resort and Casino: Kenny Chesney gets the crowd going with Gretchen Wilson and Pat Green, singing songs such as "The Tin Man" and "The Bigger the Fool (The Harder the Fall)"

Dates: June 10-11, 2005

Price: $94.50, $73.50 and $352.50

For more information please call: 702-632-7777
 
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