GM, a major holding of billionaire Kirk Kerkorian’s Tracinda Corp, in October reported a 67 % drop in quarterly profit. Casino companies have been hit hard over the past year by slower consumer spending and tight credit markets. Its stock, which has plummeted from us$ 86.75 a year ago, rose about 12 % to us$ 11.98 in morning trading.
“This transaction creates value to our stakeholders through significantly increased liquidity and enhanced financial flexibility," James Murren, chairman and CEO of MGM Mirage, said in a statement.
Murren recently took over the top job at MGM from former CEO and Chairman Terry Lanni, who retired as questions were raised about his claim that he earned a master’s degree in business administration from the University of Southern California.
The purchase price for the Treasure Island Hotel & Casino will consist of us$ 500 million in cash and us$ 275 million in secured notes. The deal is expected to close by the end of the second quarter of 2009 and MGM Mirage, the world’s second-largest casino operator, anticipates reporting a substantial gain on the sale.
Casino companies have suffered over the past year as the gambling boom in Las Vegas has fizzled, tight credit markets have jeopardized growth plans and the Chinese government has acted to slow down the Macau gambling market.
MGM, which also operates the Bellagio, Mandalay Bay and Circus Circus resorts in Las Vegas, recently postponed development work for its MGM Grand project in Atlantic City and a planned Las Vegas Strip joint venture with Kerzner International and Istithmar.
Las Vegas Strip casinos won us$ 475 million from gamblers in October, 26 % less than a year earlier. Statewide, Nevada casinos’ take from gamblers fell 22 % to us$ 905 million for October as the US economic recession continued to cut into consumer spending.
Nevada has seen gambling revenue drop for 10 consecutive months. The downturn has decimated the stock market value of gambling companies.