Harrah’s Entertainment Inc. (HET) will soon lose its title as America’s largest gaming company but the loss will only be temporary, if federal officials act as expected.
The announcement last week that the Federal Trade Commission has approved MGM MIRAGE’S (MGG) proposal to acquire Mandalay Resort Group (MBG) means that barring a last-minute problem MGG can take over the leadership position sometime before the end of March.
The nearly $8 billion purchase, including $4.8 billion cash, $2.5 billion in debt and $600 million convertible debentures, will put MGM MIRAGE in control of nearly half the hotel rooms on the Las Vegas Strip as well as 28 casinos in five states including Nevada, Mississippi, New Jersey, Michigan and Illinois.
That last state could develop into a problem since the Illinois Gaming Board has only two members but action requires the vote of three members. And, Gov. Rod Blagojevich says he has been having trouble finding a "qualified (person) who has no ties to any of the groups that stand to benefit from the board’s decisions." He even suggested he might abolish the current board and start fresh.
Another sticking point is the matter of the two gaming licenses held by the companies in Detroit, Mich. That state’s law prohibits more than one license per company. To complete the merger, MGM MIRAGE would be forced to sell either its wholly owned MGM Grand Detroit casino or the 53%-owned MotorCity Casino.
Last week, it was reported that MGG had received a $525 million offer for its share of MotorCity Casino from politically connected Marian Ilitch, who already owns 22% of the enterprise as a member of the minority owners group. However, other minority owners reportedly are suing Ilitch to prevent her from acquiring a majority interest in the property.
As for Harrah’s, the company announced last week that the antitrust waiting period required by federal law has expired but that the planned $9.4 billion merger with Caesars Entertainment Inc. (CZR) is still being investigated by the Federal Trade Commission.
The company said it last provided information concerning the acquisition to the FTC on Jan. 18.
Once completed, the combined companies will again move Harrah’s into the forefront of the country’s gaming companies with nearly 54 casinos in five countries.
A major improvement, the company indicated, is that the merger will expand Harrah’s position in Las Vegas. An analyst recently remarked that, "Harrah’s has always been somewhat underrepresented in Las Vegas."
Commenting on the future, Charles Atwood, Harrah’s chief financial officer said, "With Caesars, we will have a leadership position in virtually every market in the U.S., including the Las Vegas Strip."
If all regulatory agencies approve the merger, Harrah’s hopes to have it all wrapped up by the end of June.
Track sale questioned
The potential for video lottery machines in Pennsylvania has raised the value of all the tracks that are nearly guaranteed a gaming license.
Witness: the recently announced sale of the aging harness track, Pocono Downs, in Wilkes-Barre to the Mohegan Tribe for $280 million. The sales price resulted in a 500% return on the 10-year-old investment made by Penn National Gaming Inc. (PENN).
Since the gaming company already owns a track — Penn National Racetrack — set to receive the slot machines, its operators were happy to pocket the Indians’ cash since they could not hold two licenses for slots properties.
And the Mohegans, operators of one of the world’s most successful casinos in the world, (Mohegan Sun in Connecticut) were happy to utilize their cash and expertise to expand their operations.
But, the Pennsylvania slots law prohibits the sale of a track for more than its market value before the law was passed. Now that state’s regulators must review the sale to determine whether it violated the law.
THE INSIDER: The New Hampshire Lottery Commission has extended its online lottery contract with Scientific Games Corporation (SGMS) through 2010. Also, Scientific Games announced it is establishing a fixed odds wagering system for Sports Toto Co. of Korea.
Class II slot machines could be in play at Remington Park in Oklahoma this summer, according to officials of Magna Entertainment Corporation (MECA).
Magna has set a conference call to review its quarterly earnings for Wednesday, Feb. 23.