GM Mirage, based in Las Vegas, was thrown into uncertainty after Kerkorian made a surprise announcement that he was interested in purchasing the Bellagio Hotel and Casino and the us$ 7.4 billion Project CityCenter out of the wider company. He holds a 56% stake in MGM Mirage, which carries a market capitalization of us$ 24.5 billion and operates a host of Las Vegas properties including Luxor, Treasure Island and Mandalay Bay.
His intentions appeared to put the whole casino company in play, with the company’s convening a special committee to advise it on how to proceed. MGM Mirage’s stock soared 27% on the announcement, and yesterday traded at us$ 86.50 - 37% higher than its preannouncement levels.
But Kerkorian appears to have backed down from his original plan, the people familiar with the matter said, in part because of the valuation implied by MGM Mirage’s new joint-venture plans with Kerzner International. The company is expected to disband the special committee, these people said. A spokesman for Kerkorian declined to comment, as did an MGM Mirage spokeswoman.
Kerzner and MGM Mirage are set to announce today that they have entered into negotiations to develop a multibillion-dollar casino resort on the north end of the Las Vegas Strip, a deal that would give South African-born casino magnate Sol Kerzner his first Las Vegas venture.
Now the remaining question for both Kerkorian and MGM Mirage is whether the company is still in play, perhaps subject to bids by private-equity players scouring the gambling market for deals.
If so, MGM would remain a ripe target. MGM Mirage is a behemoth in the Las Vegas market, where it owns a third or more of the Las Vegas Strip and about half of the hotel rooms. The properties are valuable not just for their gambling operations, but also for the value of the land beneath them, which has skyrocketed in recent years, and which can serve as a basis for levering up the company.
Kerkorian had his eye on two prime jewels: the glamorous Bellagio and the nearby CityCenter, an ambitious development that includes private residences, boutique hotels, a resort casino and a retail-and-entertainment district. CityCenter has a planned 2009 opening.
The proposed joint venture between Kerzner and MGM Mirage involves 16.1 hectares at the corner of Las Vegas Boulevard and Sahara Avenue and comes about two months after MGM Mirage consolidated its holdings on the northern portion of the Strip, near its existing Circus Circus hotel-casino.
Kerzner International, based in the Bahamas, owns and operates the Atlantis resort complex on Paradise Island, which is adjacent to Nassau, and is building a second Atlantis resort in Dubai. The closely held firm built the Mohegan Sun tribal casino in Uncasville in the 1990s. Kerzner previously operated casinos in Atlantic City.
According to company officials, Kerzner International would be responsible for designing and operating the new resort. MGM Mirage would provide the land. Each party would own 50% of the project. MGM Mirage’s land on that parcel is valued by the company at us$ 20 million per 0.40 hectare.
Kerzner and other senior executives would likely be required to undergo the casino licensing process to run a gambling establishment in Nevada. Officials at both companies declined to disclose financial terms of the proposed deal. They said the new project hasn’t yet been named and that they hope to close the deal sometime before the end of September. Construction could take roughly three years.