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Kerkorian and MGM Mirage Hire Legal and Banking Teams to Explore Breakup

By Chuckmonster on Friday, 25th May 2007 3:33am
  » filed under Mergers & Acquisitions  comments: 0


Capping this weeks exciting news of Kirk Kerkorian's play for MGMMirage's Bellagio and CityCenter properties, both parties have hired big gun legal and financial teams to help them explore and figure out the pot odds on this mega-gamble on the Vegas Strip. Both players seem to have some decent hole cards... it's only a matter of time before we see who's got the nuts.

MGM Mirage has hired UBS AG for financial and Weil Gotshal & Magnes for legal advice during, what Bloomberg media is strongly calling a "break up" of MGM Mirage. On the other side of the table, Kerkorian's Tracinda Corporation has retained Morgan Stanley as a financial advisor for the proposed buyout of Bellagio and CityCenter.

Now, this is a lot of hullaballoo financial nonsense that I'm only posting because, frankly, it's shocking. MGM Mirage devoured Mandalay Resorts not but 3-4 years ago... they're only now getting all of their properties to operate under one Players Club card. To disintegrate what has taken 30 years to build would be a compelling plotline for a sequel to Super Casino... in the near term though... this is some pretty exciting stuff to watch unfold.

If you kill the king - Bellagio - and the heir apparent - CityCenter - MGM Mirage is left with Mandalay Bay, MGM Venti and Mirage/TI as the main LV earners. While it is true that the sale of Bellagio and CityCenter will give them a sizeable cash infusion to high-tail the Project Circus-Circus Center development process, it would be years before a plan is even formulated let alone acted upon. Building a casino resort is one thing, building a casino resort that is partially financed by "permanent owners of condo's" is a whole different ball game. A project with such complexity has a very long gestation period, particularly if you factor in labor and materials costs and the topsy turvy condo market in Las Vegas.

There is semi-decent chance that MGM Mirage may slowly be stripped and sold as barely recognizable shards after all is said and done. However, a more plausible deal would be MGM Mirage unloading Bellagio and CityCenter to Tracinda - then using the cash infusion and increased market cap of their stock price to finance and expedite the Circus-Circus Center project and other developments in cash rich Asia. Its unclear what MGMMirage's stock valuation will be like with Bellagio and CityCenter off their books. By the time this theoretical deal closes, MGM Grand Macau will be open and pouring MOPs into their coffers at a rate hitherto unheard of. Tracinda may take control of Bellagio and finish off City Center as planned, operate them for a spell then either buy out the rest of MGM Mirage or sell back to MGM Mirage in a stock switch.

Really, there is no clear path as to how this whole thing is going to shake out. I really have no idea... but it's still fun to play chess with other peoples casinos.



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