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MGM Mirage Offers $7.65 Billion Mandalay Resort Group

MGM Mirage announced late on Friday that it would buy Mandalay Resort Group for $7.65 billion, amid what is expected to be the wedding of the gaming giants.

"The combination of these two great companies will provide Mandalay shareholders with a premium price on their shares and provide MGM Mirage shareholders with some strategic benefits," MGM Mirage Chairman Terry Raney said in a prepared statement.

MGM Mirage proposed paying $68 per share in a cash transaction that would include assuming a debt of about $2.8 billion. The offer came a day after Mandalay Resorts reported record quarterly earnings, which saw its net profit jump more than 80% to $87 million.

The merger plan was announced after Friday's market close, but the two companies' shares closed higher by the day.

Mandalay Resort Group rose $5.65, or 10.3%, to settle at $60.27, with 6.4 million shares trading four times its normal volume. MGM Mirage rose $1.50, or 3.4%, to settle at $46.03, with 1.4 million shares trading twice its normal volume.

In a statement released late Friday evening, Mandalay said it had received the offer from MGM Mirage and would evaluate it carefully and respond in due course. The statement also said the company would not comment further on the matter until it was resolved.

However, one analyst explained the impact this deal could have on the gaming industry.

"If it goes through, the deal will make the world's largest gaming company. It will dramatically increase MGM's presence on the strip," said Brian Gordon, a spokesman for Applied Analysis, a financial consulting firm based in Las Vegas.

MGM Mirage is expected to generate more than $4 billion in revenue this year, while Mandalay Resort Group is expected to generate more than $2.6 billion in revenue.

After the merger, the merged company will operate more than half of the approximately 72,000 hotel rooms on the strip.

On the strip, Mandalay Resort Group operates approximately 21,000 rooms at Mandalay Bay Resort, The Hotel, Luxor, Excalibur, Circus-Circus, Monte Carlo, and Four Seasons in Mandalay Bay.

MGM Mirage operates nearly 17,000 rooms in Bellagio, MGM Grand, The Mirage, Treasury Island, New York-New York and Boardwalk Hotels.

But Gordon said MGM Mirage would add a new dimension to MGM Mirage's business by providing a major convention center that it lacked.

MGM Mirage owns casino resorts in Laughlin and Prim, Nevada, and properties in Biloxi, Miss., and Detroit. It also owns Borgata in Atlantic City in a joint venture with Boyd Gaming Corp.

Mandalay Resorts Group owns properties in Reno, Loughlin, Jean and Henderson, Nevada, and gold strikes in Tunica, Miss. The Group partly owns Riverboat in Elgin, Illinois, and Motor City Casino in Detroit.

Deutsche Bank analyst Mark Falcone pointed out that one of the companies would have to sell his Detroit assets for the deal to work.
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