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In
what would be a marriage of gaming industry titans, MGM
Mirage announced late Friday that it has offered to buy
Mandalay Resort Group for $7.65 billion.
"The
combination of these two great companies would provide
Mandalay shareholders with a premium price for their shares
and provides several strategic benefits to shareholders
in MGM Mirage," MGM Mirage Chairman Terry Lanni said
in a prepared statement.
MGM
Mirage is offering to pay $68 per share in a cash transaction
that would include the assumption of about $2.8 billion
in debt. The offer was announced the day after Mandalay
Resorts reported record quarterly earnings, with net income
jumping more than 80 percent to $87 million.
Although
the proposed merger was announced after the markets closed
Friday, both companies' shares ended the day higher.
Mandalay
Resort Group closed at $60.27, up $5.65 or 10.3 percent,
on 6.4 million shares traded, four times the normal trading
volume. MGM Mirage closed at $46.03, up $1.50 or 3.4 percent,
on 1.4 million shares traded, double the normal trading
volume.
In
a statement late Friday evening, Mandalay said it received
and will carefully evaluate the proposal from MGM Mirage
and will respond in due course. The statement also said
the company does not intend to make any further comment
on the matter until it is resolved.
One
analyst, however, explained the impact the deal could
have on the gaming industry.
"The
deal, if it's done, is going to create the biggest gaming
company in the world. It increases MGM's presence on the
Strip tremendously," said Brian Gordon, spokesman
for Applied Analysis, a Las Vegas-based financial consulting
firm.
MGM
Mirage is expected to have more than $4 billion in revenue
this year and Mandalay Resort Group is expected to have
more than $2.6 billion in revenue.
After
the merger, the combined company would operate more than
half of the approximately 72,000 hotel rooms on the Strip.
On
the Strip, Mandalay Resort Group operates almost 21,000
rooms at Mandalay
Bay Resort, The Hotel, Luxor,
Excalibur,
Circus-Circus,
Monte Carlo
and the Four Seasons at Mandalay
Bay.
MGM
Mirage operates almost 17,000 rooms at the Bellagio,
MGM Grand,
The Mirage,
Treasure
Island, New
York-New York and the Boardwalk
Hotel.
More
than just the number of rooms, however, Gordon said the
buyout would add a new dimension to MGM Mirage's business
by giving it a major convention center, something MGM
Mirage has been lacking.
MGM
Mirage owns casino resorts in Laughlin and Primm in Nevada
as well as properties in Biloxi, Miss., and Detroit. It
also owns the Borgata
in Atlantic City in a joint venture with Boyd Gaming Corp.
Mandalay
Resort Group owns properties in Reno, Laughlin, Jean and
Henderson in Nevada, as well as the Gold
Strike in Tunica, Miss. It partially owns a riverboat
in Elgin, Ill., and MotorCity
Casino in Detroit.
Deutsche
Bank analyst Marc Falcone pointed out that one of the
companies probably would have to divest its Detroit asset
for the deal to work.
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