MGM MIRAGE in deal for U.K. casino

Tuesday, Oct. 28, 2003 | 11:09 a.m.

MGM MIRAGE has entered into a joint venture with a special events company in the United Kingdom to potentially build a casino and entertainment complex in the heart of London.

The agreement, which would give MGM MIRAGE a stake of 82.5 percent in the project, marks one of the first such deals in U.K.'s commercial capital since that nation announced plans to deregulate its gambling laws.

The proposal with the Earls Court and Olympia Group company calls for an initial investment of more than 150 million British pounds (about $254 million) and would convert a portion of space at the Olympia Exhibition Centre, a building dating from 1886 that hosts a variety of entertainment venues and special events. The company hasn't yet calculated its total investment in the project.

"We are committed to the U.K. and anticipate spending a substantial amount of money in that market if the business conditions are what we hope they will be," MGM MIRAGE Chief Financial Officer James Murren said.

The Olympia hall is a "major icon" in London and a high traffic facility that is recognized by many British citizens, he said.

"It's a very prominent early step" in the company's U.K. development plans, though "it's certainly not our (last) step," he said.

The company became one of the first U.S. movers in Britain when it announced in May it had acquired a stake in a British casino developer that has a casino under construction in Bristol, England, and plans to build more.

The London casino is contingent upon the adoption of deregulated gambling laws, a reduction in gaming taxes as part of those proposals and local permit approvals, the companies said.

MGM MIRAGE isn't discussing a timetable for development, though some analysts have predicted the implementation of new gambling rules by 2005 or 2006.

The move follows announcements by other U.S. casino companies interested in the British market, including Harrah's Entertainment Inc. and Isle of Capri Casinos Inc.

The MGM MIRAGE project would locate a "considerable gaming space in London's tight quarters and could be a valuable cross-marketing opportunity and hedge to MGM's table play exposure in Las Vegas given the sixe of London's high-roller market (an estimated $255 million to $270 million) vs. Las Vegas (an estimated $300 million to $400 million)," Lehman Brothers analyst Joyce Minor wrote in a research note to investors today.

MGM MIRAGE expects to "create a destination which will appeal to a wide audience and which has not been seen before here in the U.K.," MGM MIRAGE Development Europe's Managing Director Lloyd Nathan said.