MGM Mirage-Mandalay deal clears final hurdle

Friday, Feb. 25, 2005 | 10:52 a.m.

The Nevada Gaming Commission spent three hours trying to uncover some reasons to oppose MGM Mirage's $7.9 billion acquisition of Mandalay Resort Group.

But commissioners couldn't do it.

The five-member board concluded that the deal is in the best interests of the public and unanimously voted to clear the way for the formation of what will become the largest casino company in the world -- a distinction that may end in a few months if Harrah's Entertainment Inc. is successful in acquiring Caesars Entertainment Inc.

That deal is on the same path MGM Mirage has been on since June and is expected to close in the second quarter.

Thursday's action was the last major hurdle for the MGM Mirage-Mandalay deal. All that remains for MGM Mirage is to sell either the MGM Grand Detroit or MotorCity casino and to license the Grand Victoria riverboat in Illinois.

Michigan law prohibits the company from owning both Detroit properties and the half-owned riverboat is expected to be placed in escrow because the Illinois regulatory board is without a quorum to consider any request. A company spokesman said both actions would be completed by the end of March.

Thursday's session before the Gaming Commission was a reprise of Tuesday's state Gaming Control Board meeting. The same executives and top shareholder Kirk Kerkorian took the same seats they had Tuesday and about 100 onlookers and a bank of cameras filled the room.

MGM Mirage executives and lawyers gave slightly edited versions of the same presentations they gave Tuesday. But members of the commission augered a little deeper into the anti-competitive issues that were addressed statistically Tuesday, challenging the executives and legal experts to prove that the deal would not be harmful to employees, vendors and customers.

Even Kerkorian made his way to the podium at one point to comment on how Las Vegas has become a global competitor when executives were asked how they could justify that joining the two companies would be in everyone's best interests.

At one point, Commission Chairman Peter Bernhard asked executives to analyze the competitive impact of the joint companies conspiring to raise the hold percentage on slot machines.

"It's difficult to think in the hypothetical," responded MGM Mirage Chief Executive Terry Lanni. "I cannot recall a discussion on hold percentage. It's never been discussed at the board level or by management. We've never dictated it and we've never been interested in dictating it."

MGM Mirage attorney Ellen Whittemore also pointed out that regulators still control maximum slot hold percentages by statute. Lanni added that many slot players are sophisticated and monitor magazines and Web sites that research hold percentages and would play elsewhere if a company attempted to manipulate the hold.

Bernhard asked if MGM Mirage's dominance would discourage new investment in Las Vegas. Jim Murren, the company's president and chief financial officer, responded that Landry's Restaurants Inc., based in Houston, announced its intent to jump into the local market by acquiring the Golden Nugget downtown -- a deal made possible by MGM Mirage's sale of the property to the current owners, Tim Poster and Tom Breitling.

In the end, it was MGM Mirage's track record that sold commissioners on voting to approve the deal.

"The five years that MGM Mirage (has operated) speak louder than words," Commissioner Arthur Marshall said. "I'm willing to trust them."

But Bernhard, a baseball fan, warned MGM Mirage not to become like New York Yankees owner George Steinbrenner and attempt to buy all the best players.

"You have to worry about the Red Sox of the world," he said in reference to Boston's improbable upset of the Yankees in last fall's American League Championship Series.

The commission's line of questioning led to several other disclosures. Among them:

Lanni said Renee West, president of MGM Mirage's Primm properties, would become the company's first female president of a Strip property, although it was unclear which property that would be. Lanni said he isn't happy about the company's management being just 20 percent female and that the company's diversity program is working to place more women in management roles.

The company plans to hang on to acreage it is acquiring in the Mandalay deal, including 22 acres south of Mandalay Bay, 15 acres across the Strip from the Luxor and 27 acres north of Circus Circus. The company also plans to hold onto and eventually develop property at Atlantic City's Renaissance Pointe. A spokesman said there is no timetable on the development of the Atlantic City property.

When work begins on Project CityCenter -- MGM Mirage's master-planned project south of Bellagio -- there will be 7,000 construction jobs and when the first phase of the project is completed in 2009, there will be 12,000 permanent jobs.

Lanni said he doesn't think the company's political clout would change when the companies become one. Based on the last legislative session when lawmakers failed to approve a casino-backed tax plan, the company has no clout, he quipped.