The MGM Mirage Sells Stake in Borgata

Game analysts believe MGM Mirage’s 50% stake in Atlantic City’s Borgata could sell for between $400 million and $500 million when MGM sells its stake in the casino over the next 18 months. However, market conditions could push prices lower.

The casino operator announced on Friday that it had reached an agreement with New Jersey gaming regulators about MGM Mirage’s relationship with Hong Kong female businessman Pansy Ho, a Macao joint venture partner. The New Jersey Gaming Authority deemed her an inappropriate business partner.

Under the terms of the agreement, MGM Mirage will put its stake in a 40-acre untapped area near Borgata and the resort into a sale trust. The vacant land was a planned $5 billion resort construction site that MGM Mirage abandoned after the economy plunged.

For the first 18 months, MGM Mirage will have the right to direct the trustee to sell the property, subject to approval by the Casino Control Board. If the sale is not completed by then, the trustee will be responsible for selling MGM Mirage’s stake in Borgata and related leased land for the next 12 months.

Oppenheimer’s gaming analyst David Katz said the decline in Atlantic City’s value could reduce the price MGM Mirage can get for Borgata. Atlantic City’s gaming sales fell for the third year in a row, including 13% in 2009.

“The announcement of an agreement with MGM Mirage’s New Jersey gaming division is a bit of a positive for stocks based on liquidity relief going forward,” Katz told investors.

Deutsche Bank game analyst Andrew Jarnett attributed Bogata’s decline to potential challenges from proposed casinos in Philadelphia, including a $600 million property at Wynn Resorts.

“Management can divest 50% of its stake in a more favorable capital market environment given the 30-month period set out in the agreement,” Janet said, “and we believe that achieving a significant valuation of New Jersey assets has been significantly reduced.”

Boyd Gaming owns the other 50% of Borgata and operates the resort. Boyd has the right to first decline the sale. During Boyd’s quarterly earnings conference call last week, CEO Keith Smith said the company would consider buying shares in MGM Mirage.

“We will closely monitor the sale process and act in the best interests of our company,” Smith said. “We are pleased to have 50% ownership of Atlantic City’s premier gaming property and, for us, it will continue to do business as usual in Borgata.” 파친코

New Jersey gaming officials declined to comment beyond a statement explaining the terms of the agreement. In May, the gaming enforcement department asked MGM Mirage to cut ties with Ho.

“While we have the utmost respect for DGE, we do not agree with our evaluation of our partners in Macau,” MGM Mirage Chairman and CEO Jim Merren said in a statement. “Regulators in other regions where we operate casinos have thoroughly considered this matter and all of them have decided that this relationship is appropriate or that no further action is needed.”

Nevada and Mississippi gaming regulators have approved Fancy’s suitability, the daughter of Macau casino kingpin Stanley, who international law enforcement has claimed to be a member of the China Organized Crime Triad. Fancy’s and MGM Mirage are MGM Grand Macau’s 50-50 partners.

The information behind the state’s request remains sealed but could be made public when the Casino Control Board considers the issue. Fancy Ho said he still runs Macau casinos independently from his father, who runs several.

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