Mandalay accepts offer

Bloomberg News

Wednesday, June 16, 2004 | 8:20 a.m.

Bloomberg News

Mandalay Resort Group said today it accepted MGM MIRAGE's sweetened $7.9 billion takeover offer, creating the world's largest casino resort company with half of the hotel rooms on the Las Vegas Strip.

MGM MIRAGE, controlled by billionaire Kirk Kerkorian, will pay $71 a share and assume $2.5 billion in debt to acquire Mandalay, the companies said in a joint statement. The enlarged company will surpass industry leader Caesars Entertainment Inc. and No. 2 Harrah's Entertainment Inc. with $6.5 billion in annual sales.

Kerkorian, 87, is trying to gain a larger share of the convention business in Las Vegas, which hosted 19 percent of the largest U.S. events last year, up from 13.5 percent in 1998. The Federal Trade Commission may demand that the combined company sell a Las Vegas casino or one of its two Detroit operations, analysts said.

"They may have to sell off assets," said Seth Tobias, who manages $500 million as general partner of New York-based Circle T Partners LP, including shares of MGM MIRAGE. Even so, "the management of both companies are pretty savvy and I don't think they would have moved forward if their counsel didn't assure them the deal would get through."

The purchase creates a company of 28 resorts in Nevada, Mississippi, Illinois, Michigan and New Jersey. MGM MIRAGE currently ranks third among U.S. casino operators behind Caesars and Harrah's.

"The $71 offer is fair," Blaylock & Partners analyst Ray Neidl in New York said.