ithout naming the suitor, MGM said last week it received an offer for its 50 % stake that will generate proceeds of about us$ 250 million. The people declined to be identified because the deliberations aren’t public.
With Borgata, Leonard Green would gain a stake in the most profitable Atlantic City resort, at a time when the state is seeking ways to help operators reverse a market-wide gambling revenue decline now in its fourth year. Governor Chris Christie in July proposed taking control of policing, land use and development on the Boardwalk and nearby areas as competition from neighboring states grows.
Boyd Gaming, operator and half-owner of Borgata, has the right to match Leonard Green’s bid and said in an October 18 filing that it’s evaluating its options. Boyd spokesmen didn’t immediately respond to an e-mail request for comment. Michael Gennaro, a spokesman for Leonard Green, declined to comment. Gordon Absher, a spokesman for Las Vegas-based MGM Resorts, also declined to comment.
The buyout firm, founded in 1989, has holdings in fitness club operator Equinox, and retailers Whole Foods Market and Sports Authority, according to its website. Leonard Green doesn’t list any gambling investments at the site.
Casino overbuilding and debt taken on before the 2008 financial crisis have created opportunities for private-equity investors such as Leonard Green, whose founder died in 2002.
The firm bid unsuccessfully for the M Resort Spa Casino south of the Las Vegas Strip with the founding Marnell family, who spent about us$ 1 billion building the property, people with knowledge of the sale said earlier this month. Penn National Gaming won the auction, agreeing to pay us$ 230.5 million for about us$ 860 million in M Resort debt.
Authentic Brands Group, one of Leonard Green’s holdings, agreed last month to buy TapouT and other clothing brands associated with the mixed-martial arts network Ultimate Fighting Championship. Las Vegas-based UFC is majority owned by Lorenzo and Frank Fertitta, members of the family that founded Station Casinos.
MGM, the biggest casino operator on the Las Vegas Strip, is leaving Atlantic City rather than drop its ties to Pansy Ho and their joint venture in Macau, China, the world’s largest casino market. MGM pledged to sell its Borgata stake in March after the New Jersey Division of Gaming Enforcement found Ho to be an unsuitable partner.
MGM said the offer for Borgata valued the New Jersey property’s total equity and debt at us$ 1.35 billion. MGM and Ho plan to sell shares in their Macau casino venture. Borgata had the highest gross operating profit of Atlantic City’s 11 casino resorts in the first half of this year and in 2009, according to the New Jersey Casino Control Commission.
Boyd and MGM refinanced the resort in August, in part to pay themselves a dividend. Borgata includes the us$ 400 million Water Club hotel tower, opened in June 2008.
MGM agreed separately in July to sell the land underneath Borgata to Vornado Realty Trust and Geyser Holdings. The deal is scheduled to close in the fourth quarter and will deliver MGM net proceeds of about us$ 71 million.