Stock repurchase offer oversubscribed

Monday, July 26, 1999 | 11:26 a.m.

MGM Grand Inc. of Las Vegas said holders of 15.3 million shares tendered into the company's offer to buy 6 million shares at $50 a share.

The amount represents about 24.3 percent of the company's outstanding common shares and about 65 percent of the total not owned by majority shareholder Kirk Kerkorian.

Kerkorian didn't tender any of his shares into the offer, though he has registered 3.9 million shares of MGM Grand stock for sale. If that sale is consummated, Kerkorian will still own about 61 percent of MGM stock.

The repurchase will be prorated, with MGM buying back about 39.2 percent of the shares offered by stockholders. The $50-a-share offer, which expired Friday, completes the 12 million-share repurchase program MGM Grand began in June 1998, when fears of overbuilding in and inadequate air service to Las Vegas had sent casino stock prices plummeting.

But MGM Grand was in the midst of a $700 million-plus upgrade of its flagship Las Vegas hotel-casino, preparing to acquire Primadonna Resorts Inc. and readying its plan to open the first temporary casino in Detroit.

MGM Grand Chairman Terry Lanni has said that, despite the $300 million cost of the latest repurchases, the company's balance sheet remains one of the strongest in the gaming industry.

"We are providing value to those shareholders who wish to dispose of a portion of their holdings. At the same time, we have the financial strength to continue to execute our aggressive growth strategy," he said.

MGM Grand Chief Financial Officer Jim Murren has said directors approved the tender offer because buying the company's stock is a good investment, as it's poised to reap the benefits of its major investment in the Las Vegas market.

"We made a bet on the company last year when the consensus view was quite negative on Las Vegas and our stock," Murren said. "We think our stock is even better valued today at $50 because operating trends are stronger and capital spending on the MGM Grand is largely complete."

MGM stock was off $2.625 a share, to $46.625, in late morning trading today.