Dubai buys more MGM shares

December 31, 2007 4:26 AM


Will recent history repeat now that Dubai has again bought into MGM MIRAGE Inc. (MGM)?

Earlier in 2007, Dubai offered to buy some 14 million shares at $84 per share at a time when the shares were selling at a lower price. The response was less than weak because the share value of MGM surged to nearly $99 per share on the open market.

When the listed time had elapsed, Dubai indicated it was still interested in buying the shares at the designated price but would withdraw its offer to await better market conditions.

Since that announcement, MGM shares began trading downward until the last week of the trading year when it fell to the low $80, shortly after opening its 50% owned Macau casino.

But interest in the stock was revived on Dec. 24 when Cayman LP, an investment group owned by the Dubai government, bought five million shares of the Las Vegas-based casino company from the Lincy Foundation for $424 million or $84.80 per share.

The Lincy Foundation was identified as a Kirk Kerkorian charity. Kerkorian is the largest single stockholder in MGM MIRAGE Inc.

The "Christmas" purchase moved Dubai World ownership in MGM to 19.5 million shares or approximately 6.5% of the company.

Previously, Dubai World separately took a 50% position in MGM’s CityCenter megaresort now under construction on the Las Vegas Strip.

Announcement of the Dubai share purchase was well-received on Wall Street with investors pushing the price of the shares above the $85 mark.

In a client note issued by Jefferies & Co., analyst Lawrence Klatzkin said the investment arm of the Dubai government, paid more for the five million shares than it had for the 350,000 shares it had acquired initially.

Klatzkin maintains a "buy" rating on the stock and said he believed Dubai World will continue to accumulate MGM shares.