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April 16, 2014

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FTC clears MGM Mirage buyout of Mandalay Resort Group

The Federal Trade Commission voted unanimously this afternoon to allow MGM Mirage's $7.9 billion buyout of Mandalay Resort Group to proceed, paving the way for a deal that would put nearly half of the Strip's more than 74,000 hotel rooms under one company.

The five-member commission didn't require any of the company's properties to be sold or otherwise impose any conditions on the transaction, an FTC spokesman said today.

MGM Mirage is already proceeding with the sale of a Detroit casino by the end of next month to comply with Michigan gaming rules prohibiting ownership in two or more Detroit properties.

The FTC announced today that it had signed off on the deal hours after Nevada regulators set special meetings of the state Gaming Control Board and the Nevada Gaming Commission to consider the acquisition.

The Gaming Control Board is scheduled to meet Tuesday at 10 a.m., while the Nevada Gaming Commission will consider the board's recommendation two days later at 1:30 p.m. Both meetings will be at the state's Grant Sawyer Building in Las Vegas.

Federal oversight of the casino industry is shared by the FTC, which investigates potential mergers' effects on commerce, and the antitrust division of the Justice Department.

Approvals from the FTC and Nevada regulators are the last major hurdles that need to be cleared for the ownership of the Mandalay Bay, Luxor, Excalibur and Circus Circus properties to come under the same umbrella with the MGM Grand, Bellagio, Mirage and Treasure Island resorts.

Mississippi regulators already approved the deal in December. Michigan, where the company is selling a casino, has no say over mergers. Illinois, where MGM Mirage would take over a stake in a riverboat casino, also has no say on mergers and only has to approve a license change for the riverboat.

That asset would likely be put into a trust for Illinois regulators to consider at a later date because the state's Gaming Board doesn't yet have a quorum, MGM Mirage spokesman Alan Feldman said. That wouldn't hold up the transaction, he said.

Some observers suspected MGM Mirage might be required to sell off one or more properties in Las Vegas to satisfy federal regulators.

The combination of the two companies would put 11 of the top 22 Strip properties, 44 percent of the table games and 40 percent of the slots under MGM Mirage, which got its name as a result of a merger in 2000 between MGM Grand Inc. and Mirage Resorts Inc.

In addition to expanding MGM Mirage's hotel assets, the deal will solidify the company's presence in the conventions and trade show markets with the acquisition of the Mandalay Bay Convention Center, the ninth largest exhibit hall in the country.

But MGM Mirage executives have maintained that no Las Vegas properties would be sold and that the profit generated by the combined company would be reinvested into existing and new projects here.

"We love all of our children. We're in the business of growing all of our business," MGM Mirage Chief Financial Officer Jim Murren said in an earlier interview.

The Las Vegas Strip competes with casinos worldwide, including a proliferation of tribal casinos in the United States, executives argued. The company would remain competitive with other markets in spite of its dominant position in Las Vegas, they said.

The acquisition gives MGM Mirage control over 11 major resorts on the Las Vegas Strip, from Mandalay Bay at the south end to Circus Circus up north. All save for MGM Grand, the company's largest property, would be located on the west side of the Strip.

Antitrust experts said they weren't especially surprised by the news and said MGM Mirage was no doubt successful in convincing regulators that the newly combined company wouldn't have undue control over prices in Las Vegas.

"The FTC was going to have to define a fairly narrow market to require spinoffs," said Marc Schildkraut, an antitrust attorney representing major companies and a former assistant director with the Federal Trade Commission's Bureau of Competition. "They are really facing a lot of competitors," even in Las Vegas itself, he said.

"A lot of people are gamblers and they can get on a place and go somewhere else if they don't like the odds in Las Vegas," Schildkraut said.

There's more of a concern about price competition in smaller, more localized gambling markets that aren't competing against other regions, he said.

Warren Grimes, a professor of antitrust law with Southwestern University in Texas, said merger regulation and oversight has been "relaxed a lot" under the Bush Administration.

The argument that tribal casinos compete with Las Vegas only goes so far because tribal casinos are typically for daytrippers seeking a different experience than Las Vegas, where destination resorts are concentrated within a few square miles, Grimes said.

The acquisition, first disclosed in June, was one of two blockbuster merger deals involving Strip properties last summer. Within weeks of the announcement of the MGM Mirage-Mandalay deal, Harrah's Entertainment Inc. unveiled a $9.4 billion plan to acquire Caesars Entertainment Inc. The FTC is still investigating that purchase, expected to close by the end of June.

Analysts say the Harrah's deal is more complex because it involves more markets with overlapping properties. Both companies have announced the sale of several properties in advance of its expected close.

Antitrust lawyer Steven Newborn, former director of litigation of the FTC's Bureau of Competition, said the FTC vote on MGM Mirage is "instructive but by no means determinative" of a similar outcome on the Harrah's-Caesars investigation.

"There are different facts involved" in the two deals, he said.

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