‘Dutch Auction’ offers bargain to MGM MIRAGE shareholders

Jan 15, 2008 6:24 AM

Last year, when it became known that Dubai World was interested in acquiring a portion of the outstanding stock in MGM MIRAGE Inc. (MGM), the price of the company’s stock was pushed to new highs.

Dubai World said it would buy 14 million shares at $84 per share when the share price was still in the $70s. But investors felt the foreigner would go higher with its offer so they bid up the share price until it challenged $100 per share.

When no further action boosted the price of the stock, investors watched as the price receded, eventually coming down to a figure just below Dubai World’s previous offer.

With less interest being shown in the stock, Dubai World last week announced a cash tender offer to repurchase up to 10 million MGM MIRAGE shares for between $75 and $80 per share.

The company has 293.8 million shares outstanding. Billionaire financier Kirk Kerkorian’s Tracinda Corp. owns 153.8 million shares, currently representing about 52% of the total outstanding.

Under terms of Dubai World’s "Dutch Auction" tender offer, shareholders will be able to tender their shares within the price range. Based on the number of shares offered, MGM MIRAGE and Dubai World will choose the lower price at which they may purchase 10 million shares.

Based on Monday’s closing price on the open market of $69.64 per share, the offer represents a bargain.

Analysts felt that the Dubai World offer would place a floor under the share price and would prevent it from going too much lower.

Dubai World and its affiliates own 19.5 million shares, most of which were acquired at a price of $84 per share or more.

Speedway sale

MTR Gaming Group Inc. (MNTG) announced on Monday that it was expediting the sale of its Speakeasy Gaming of Las Vegas subsidiary by separating the real estate from the gaming operation.

As such, the company said it had completed the sale of its Speedway Casino in North Las Vegas real property to Ganaste LLC for $11.4 million.

The gaming assets will be sold to Lucky Lucy D LLC whose owner already has been found suitable for a gaming license by Nevada regulators. That sale will be for a total of $6,775,000.

At the time of closing, the company said, the gaming purchaser will pay $4,775,000 immediately with the balance to be paid over four years.

The sales are subject to state and local officials.

Tropicana interest

There has been such a heavy amount of interest expressed by potential buyers of the Tropicana Hotel/Casino in Atlantic City that the person designated to find a buyer has reached out for help.

Retired state Supreme Court Justice Gary Stein announced he had chosen investment bankers Bear Stearns and the New York law firm of Debevoise & Plimpton to help him choose a buyer.

Stein was appointed after the N.J. Casino Control Commission voted not to renew the Tropicana’s license and found owners Columbia Sussex Corp. unsuitable for a license.

Reports have indicated that some 20 different companies or groups have indicated an interest in acquiring the property.

In announcing his decision Stein said, "I interviewed a number of investment bankers and attorneys who specialize in merger and acquisition work. I feel that this team will enable me to develop a fair process, find a suitable buyer and obtain the best price for the Tropicana."

Packing it in

Jeffrey Jacobs, who was introduced to casino gambling while a board member and investor in the since-demolished Boardwalk Casino on the Las Vegas Strip, has decided to place a "for sale" sign on his Colonial Downs racetrack in Virginia.

The reason: no hope of getting casino gambling or even slot machines.

Jacobs, who operated the track and its off-track betting sites under Jacobs Entertainment, a company that he owned with his father, Richard Jacobs, a well-known sports and real estate figure in Cleveland, Ohio, announced the move last week.

"Colonial Downs has always been an artistic success and, in recent years, it has experienced economic improvement as well," Jacobs said in a statement. "Unfortunately, we have been unable to secure the tools necessary to allow us to grow live racing in Virginia to its full potential."

The Virginia track has been competing with the surrounding states that benefit from purse monies beefed up by slots revenue.

Jacobs Entertainment currently operates casinos in Black Hawk, Colo, and in both Reno and Elko, Nevada.

Buyout nears

Officials of Harrah’s Entertainment Inc. say they expect the multi-billion dollar acquisition of the company by the partnership of Texas Pacific Group and Apollo Global Management LP to close on Jan. 28.

Following the $90 per share buyout, Harrah’s Entertainment will continue operating as a privately-held company.

As part of the deal, Bank of America and Deutsche Bank have begun meetings to sell some $9 billion worth of loans related to the buyout. The sale is starting about a week later than had been planned.