Thursday, April 14, 2005 | 11:02 a.m.
DETROIT -- State gambling officials on Wednesday approved Marian Ilitch's bid to buy out her partners in MotorCity Casino and become sole owner of the venture, which takes in more than $400 million in revenue annually.
The Michigan Gaming Control Board voted 4-0 to approve the sale. One board member was absent.
MotorCity, one of three Detroit casinos, is to be sold because of the pending merger between MGM Mirage Inc. and Mandalay Resort Group. MGM Mirage already owns Detroit's MGM Grand Casino, and Michigan law prohibits the company from owning more than one casino in the city.
The last and final hurdle to approving the deal remains in Illinois, where regulators must license a riverboat half owned by Mandalay Resort Group.
MGM Mirage executives are meeting with Illinois regulators today to discuss one of two possible alternatives, spokesman Alan Feldman said.
The first option is for the company to put the Grand Victoria riverboat into an escrow account with a trustee that is already licensed. The Illinois Gaming Board could then license MGM Mirage at a later date and pull the asset out of the trust, Feldman said.
The second option would be for regulators to approve a direct transfer of the casino license from Mandalay to MGM Mirage, he said.
"Today's discussion will be about which of the two proposals the board feels it can deal with more expeditiously," he said.
Analysts believe regulators may opt for the escrow option because it wouldn't put board members -- three of the five being new members -- in the position of licensing a new buyer on such short notice.
The sale of the Detroit casino is contingent on the completion of MGM Mirage's acquisition of Mandalay, expected by June 30. Although it gave its approval to the deal, the Michigan board is expected to further scrutinize the financing and other details in the coming months.
Ilitch, who already owns 25 percent of MotorCity, is paying $525 million for the 53.5 percent stake owned by Mandalay Resort Group. She also is buying an 11.5 percent stake held by Atwater Entertainment, a group of more than 100 local investors, for $106 million, and the remaining 10 percent from another local investor, Tom Celani, for an undisclosed amount.
Ilitch told the gaming board Wednesday she didn't plan big changes in MotorCity's management.
"I've been around a pretty long time to know that you don't break up a winning team," she said.
Ilitch and her husband, Mike, began their business empire in 1959 with the opening of a pizza parlor in suburban Detroit. That first Little Caesars restaurant flourished into one of the biggest national pizza chains. The Ilitches' companies, which include hockey's Detroit Red Wings and baseball's Detroit Tigers, had combined revenue in excess of $1 billion last year.
Wednesday's meeting lasted about an hour and 15 minutes. The board did not have to consider Ilitch's suitability as an owner because she is already licensed because of her 25 percent stake. Instead Ilitch's team answered questions about the intricacies of the deal and the financing for it.
Ilitch said afterward she was surprised there were no questions from the public.
She told reporters that buying the casino was an important part of her family's commitment to Detroit's economic revival.
"I have a passion for this city. I was born and raised here," she said. "It breaks my heart that our city has come down."
Ilitch said she remained committed to MotorCity's planned expansion. All the Detroit casinos were built with the understanding they would soon be replaced by permanent casinos, complete with hotels. MotorCity opened in December 1999.
"My hope is I'm not just going to put up a hotel. I'm going to have a top-class hotel," she said.
Construction has been delayed because of a lawsuit from the Lac Vieux Desert Band of Lake Superior Chippewa Indians, which claimed Detroit's 1997 casino selection process was unfair. MotorCity and Greektown Casino have agreed on a settlement with the tribe but are waiting for an injunction to be lifted before beginning construction.
If the deal is completed, MotorCity will be one of the biggest casinos in the hands of a private individual. Last year, it took in revenue of $436 million, the most of Detroit's three casinos.
In the first three months of 2005, MotorCity took in $112 million, according to figures released Tuesday by the Gaming Control Board. MGM Grand Detroit and Greektown had revenue of $119 million and $80 million for the quarter, respectively.
MGM Mirage shares fell $1.35 to $73.70 in midday trading today on the New York Stock Exchange, while Mandalay shares rose 2 cents to $70.64.
Sun business writer
Liz Benston contributed to this report.