Gaming Insider by Phil Hevener |
Former Frontier owner Phil Ruffin stopped in at the Treasure Island during a recent evening outing. His plan was to eat in one of the resort’s nice restaurants, enjoy the evening and probably take a close look at the way they did things.
He had his reasons.
But things did not start well. His reservations were not there. And Ruffin’s name did not ring any significant bells.
That’s the way my sources explain it, pointing out that the low key Ruffin did not appear to let the issue ruffle him. He left saying the restaurant staff would know who he is soon enough.
TI employees found out Monday: Ruffin’s the new owner.
Ruffin’s announced purchase of the 15-year-old Treasure Island for $775 million represents the kind of spending by a well-heeled veteran of the Las Vegas gambling business that could jump start other deals.
It also represents the best argument in the world as to why MGM Mirage is a good bet, even in this troubled economy. The company has an impressive list of assets that people with money are clamoring to buy.
Penn National is known to want the Bellagio, but this is one of a handful of companies MGM will probably remain reluctant to sell, at least for the time being. The Bellagio name is useful as MGM’s Hospitality Division expands around the world. There are plans for a Bellagio in the United Arab Emirates, Abu Dhabi, to be specific.
The Ruffin agreement also illustrates how quickly the world can change – even for a giant company – and a seemingly attractive strategy can suddenly appear outdated. A representative of the Jack Binion organization approached MGM "several months ago" and was told the company was not interested in selling any of its Las Vegas Strip properties.
But the worldwide difficulty in obtaining financing was exerting a crushing burden on even the strongest companies. Maybe it was time for a different approach to business.
The Ruffin sale agreement was finalized Saturday and an announcement made to key managers. That was a lot of people to let in on a secret that was not going to be discussed publicly for another day or two. An explanation of the deal was prepared for early Monday morning release, probably before the market opened.
Some followers of the drama wondered if MGM bosses might have been hoping the Ruffin offer, which is seven- or eight-times expected earnings this year, so I’m told, would shake loose some interest elsewhere.
Nothing like a frenzied bidding war to whet appetites and get the blood flowing.
A bit more than two years ago Ruffin found himself in the middle of exactly that sort of thing. He had the Frontier ready for a sale to Australian James Packer when El Ad Properties swooped in with an offer of about $1.2 billion for the 38.5 acres on which the Frontier then sat.
Now there was an offer Ruffin could not refuse.
Go back a few years and there was another example of a last-minute change of partners. Steve Wynn was ready to buy Caesars Palace when the late Arthur Goldberg stepped in with a bigger offer.
Ruffin, like handful of other well-heeled groups – Binion, Packer, Penn National, Carl Icahn and probably a few others, have been taking close looks at how the casino business has been ravaged by the sour economy. They are looking for the bargains that they are convinced will be available when the economy hits bottom.
That’s the essence of what Ruffin said to the representative of a fellow bargain hunter a couple weeks ago.
"People like you and me, we’re gonna be in charge when all this settles," is what he supposedly said, or words to that effect.
MGM Mirage President Jim Murren said last week that the company would move toward the sale of non-core assets but industry followers were not certain the TI fell into that category, located as it is at the southwest corner of the Strip and Spring Mountain, across the street from the Wynn properties, the Palazzo and Venetian and the Fashion Show.
MGM is clearly focused on getting CityCenter finished, giving the project whatever’s necessary to make it work. The TI sale will do that, creating what another source termed, "some very nice instant liquidity."
The nearby Bellagio and Mirage will probably not be sold. They are top-of-the-line properties, brands that are important to the MGM’s cache as its new hospitality division puts down roots in significant travel destinations around the world.
Treasure Island may be the nicest of the company’s non-core assets, with a location that is tempting. And it is in very good condition, thanks to the tens of millions of dollars MGM has invested there during recent years.
"The deal with Ruffin will create a lot of nice instant liquidity, maybe even get rid of some of the unsightly debt MGM has accumulated as it labors to push CityCenter toward completion," an insider told me.
It’s always nice to rid yourself of debt, unsightly or otherwise.