Wednesday, March 23, 2005 | 11:13 a.m.
MGM Mirage today said the appointment of new regulators in Illinois will delay their $7.9 billion acquisition of Mandalay Resort Group by about four to six weeks.
Separately, the company said it had agreed to sell Mandalay's stake in a Detroit casino to a minority partner for $525 million -- an anticipated transaction that removes another barrier in the megadeal.
MGM Mirage anticipated consummating the deal this month but had been waiting on Illinois regulators. Until last week, the Illinois Gaming Board was short by three members and therefore could not vote on a transfer of interest in an Illinois riverboat from Mandalay to MGM Mirage.
Mandalay has a 50 percent interest in the Grand Victoria riverboat in Elgin, which is northwest of Chicago.
MGM Mirage officials previously said they would place ownership of the riverboat into an escrow account so the full Illinois Gaming Board could take a vote at a later date.
Last week's appointment of three new members to the board removes the possibility of creating an escrow account, MGM Mirage spokesman Alan Feldman said.
The company received word late Tuesday that the recently convened full board would not have time to consider the transfer of interest, Feldman said.
"This board now has eight months of stuff lined up that needs to be considered and they couldn't guarantee that they could get it on the agenda in time," he said. "I suppose it's very possible that we wouldn't have had all the materials that they would need in that amount of time. We have been spending six months working on an escrow transaction that now is moot."
The Illinois Gaming Board will only consider the license transfer for the Illinois riverboat and will not be voting on the entire Mandalay acquisition.
In a statement, both companies said the deal would be complete by the end of June, but MGM Mirage officials said four to six weeks is more likely.
MGM Mirage will sell Mandalay's 53.5 percent stake in Detroit's MotorCity Casino to an affiliate of Marian Ilitch.
Through affiliates, Ilitch owns a 25 percent interest in the casino but is negotiating to buy out the property's minority partners as well as settle a lawsuit claiming she violated a partnership agreement and secretly negotiated a deal to sell her stake in MotorCity to MGM Mirage.
Her family's company owns the Detroit Red Wings and Detroit Tigers sports teams as well as the Little Caesars pizza chain.
The sale was required by Michigan law, which prevents any company from owning more than one Detroit casino. MGM Mirage already owns the MGM Grand Detroit.
The transaction is subject to approval by Michigan gaming regulators.
MGM Mirage may know later today when the Detroit sale can be considered, which should be soon and isn't expected to hold up the deal, Feldman said.
Several Wall Street analysts said that they weren't concerned about the delay and that it wouldn't affect earnings estimates for the deal or their outlook for the company.
But some analysts dropped price targets for MGM Mirage stock based on one less quarter of contribution from Mandalay.
Shares of MGM Mirage fell more than $2 per share in morning trading today to $73.04. Shares of Mandalay were down 26 cents in midday trading to $70.50 per share.