MGM MIRAGE ends bid for Wembley

Toby Anderson

Wednesday, May 5, 2004 | 11:13 a.m.

MGM MIRAGE pulled out of a three-month takeover battle for Wembley Plc, clearing the way for Starwood Capital Group LLC and Kerzner International Ltd. to buy the U.K. owner of dog tracks for about $555 million.

BLB Investors LLC, a company formed by financier Barry Sternlicht's Starwood, Kerzner and Waterford Group LLC, last month agreed to pay 860 pence for each Wembley share, topping Las Vegas-based MGM MIRAGE's 840 pence bid. Today, MGM MIRAGE said BLB's latest offer is more than what it wants to pay.

Government proposals to relax gambling laws have drawn U.S. suitors to Wembley's dog tracks in London, Birmingham and Manchester. The U.K. is considering allowing gambling venues to add more slot machines and abolishing rules that patrons must be members to wager. The changes may boost Britain's annual gambling revenue to $2.3 billion, Lehman Brothers Inc. analysts estimate.

"We thought the auction had further to go but obviously MGM didn't think they could realize more value," said Neil Hermon, who helps manage the equivalent of $1.26 billion at Henderson Global Investors in London. "Still, its good value for Wembley shareholders."

MGM MIRAGE shares rose 36 cents to $44.85 in early composite dtraing on the New York Stock Exchange.

British lawmakers made proposals last month to further deregulate the country's gambling industry. The Joint Committee on the Draft Gambling Bill made recommendations to overhaul 35-year-old legislation by, for instance, allowing all casinos to offer bingo and betting and by permitting operators to install larger numbers of gaming machines.

"We're pleased to have clarity," said Wembley spokesman Matthew Smallwood. "We will move forward with BLB."

Starwood Capital, a closely held real estate investor trust based in Greenwich, Conn., is headed by Sternlicht, 43, founder of Starwood Hotels & Resorts Worldwide Inc., the owner of the Sheraton and Westin chains. Kerzner, based in Paradise Island, Bahamas, owns the Atlantis Resort there and also operates resorts in Mexico and Mauritius. It developed the Mohegan Sun casino in Connecticut with Waterford.

"The only offer is now the agreed one from BLB and it is recommended by the board," said BLB spokesman Andrew Honnor.

New legislation may boost the number of casinos in Britain to 185 from 129, Bear, Stearns & Co. analysts in London estimate. They expect laws to be implemented in 2006. About 80 percent of Britons gambled in the past year, according to data from Gamcare, which monitors gambling. In the U.K., 4 percent of people visit a casino each year, compared with 25 percent in the U.S.

MGM MIRAGE, which gets about two-thirds of its profit from Las Vegas casinos including the Bellagio, said last month it may build casinos in cities including Manchester and Liverpool for 650 million pounds, in a venture with Peel Holdings Plc. MGM trails Caesars Entertainment Inc. and Harrah's Entertainment Inc. in annual revenue.

MGM Chief Financial Officer James Murren said last month he expects growth in the gaming industry to come from overseas markets, such as the U.K. and Asia.

The company said April 21 that first-half net income doubled to $105.8 million as more travelers visited its casinos in Las Vegas.