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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