MGM MIRAGE joins Macau licensee
for casino project

Jun 22, 2004 3:55 AM

Right on the heels of its takeover agreement with Mandalay Resort Group Inc. (MBG), MGM MIRAGE Inc. (MGG) completed a joint venture agreement that will make it a major player in the emerging gaming market of Âí­Macau.

In an announcement Monday, MGG said it had agreed to a joint venture agreement with Pansy Ho Chiu-king to develop, build and operate a major hotel-casino resort in the Chinese enclave off the coast of Hong Kong. MGM MIRAGE initially was one of the failed bidders for the three licenses granted by the Macau government. The winners were a Sheldon Adelson partnership, Wynn Resorts and the company owned by Stanley Ho, the gaming giant who maintained a monopoly in Macau for nearly three decades.

Pansy Ho is the daughter of Stanley Ho whose company, Sociedade de Jogos de Macau, holds the gaming license. Under the agreement, which is subject to regulatory approval, the facility to be built with the name "MGM Grand," will be 50/50 owned and jointly operated by the two partners.

The casino will be located on a prime waterfront site next to the casino to be built by Steve Wynn and near the Lisboa Hotel/Casino that is owned and operated by Stanley Ho. In effect, the combination of the three properties will be the beginning of what will eventually be known as the "Strip of Macau."

Officially, Stanley Ho’s daughter, Pansy, is managing director of Shun Tak Holdings Limited, a publicly-traded Hong Kong conglomerate that operates shipping, property, hospitality and investments divisions.

The agreement, rumored and often denied during the past few months, is another feather in the cap of Terry Lanni, chairman and CEO of MGM MIRAGE Inc. Despite the initial failure of the company’s bid for a license, he continued his efforts to ensure that his company would enter the emerging gaming market, whose potential for growth has been described by some analysts as easily topping existing world markets.

In commenting on the agreement, Lanni praised the efforts of Pansy Ho. "We are pleased to be entering the Macau market with our partner, Pansy Ho, for whom we have the greatest respect. We have always said we would like to participate in Macau under the right circumstances. We are very excited about our joint venture with Pansy Ho."

Deal on track

As for the $7.9 billion acquisition of Mandalay Resort Group by MGM MIRAGE, it appears that both sides were satisfied to leave the future in the hands of lawyers, bankers and speculators”¦those who have been attempting to predict what properties would be affected by the merger.

Regulators in the various jurisdictions, as well as the Federal Trade Commission, will have to review the impact of the takeover and grant their approval before anything takes place. Such reviews, it has been suggested, could take between six to nine months.

Despite the offer of $71 per share for the MBG company, Wall Street investors have kept the trading price in the $68-plus range, while MGM MIRAGE’s shares have been inching up to the $48-plus range.

California slots

"The Terminator" California Arnold Schwarzenegger partially fulfilled a campaign promise on Monday when he signed re-negotiated contracts with five Indian casino operators that will help him meet state budget needs.

According to a preliminary explanation of the contracts, the five tribes have agreed to back a $1 billion bond in exchange for the state’s lifting its cap on the number of slot machines each tribal casino can operate.

The deal involves the Viejas, Pauma, Pala, Rumsey and United Auburn Tribes. The latter has a casino near Sacramento that is operated by Station Casinos Inc. (STN).

Analysts suggested the deal will strongly benefit the slot machine manufacturers since the casinos will be able to add substantially more slots to their current limit of 2,000 machines.

Now Schwarzenegger says he will form a committee to work against two referenda questions that would override Monday’s agreements. The ballot questions would either limit the amount of money tribes would pay the state for the slots monopoly or, as in language proposed by tracks and card clubs, would require Indian casino operators to agree to turn over 25% of their revenues to the state or failing that the tracks and card clubs could install slot machines at their facilities.

”˜Hard Rock’ success

"Gaming has allowed us to become self-sufficient," the leader of the Seminole Indian Nation declared last week in hailing the recent opening of the Hard Rock Hotel & Casino in Hollywood, Fla.

This was the second Hard Rock-themed casino opened by the Seminoles this year. The first was in Tampa, Fla.

Addressing a group of business leaders in Boca Raton, Seminole President Moses Osceola estimated that the two casinos would generate about $1 billion in annual revenue. This, he said, helps the Seminole people to live independently of state and federal grants and also enjoy a higher standard of living.

Osceola said that casino revenues now permit the tribe to pay each Seminole, including children, $42,000 a year plus providing free health care and college tuition.

ISLE’s losses

Slower than expected business at some of its newer properties was blamed for the losses incurred by Isle of Capri Casinos Inc. (ISLE) during the fiscal fourth quarter. The company said it was launching a marketing campaign to turn things around.

During the period that ended on April 25, revenues were $292.6 million, compared to $275.9 million in the same period in fiscal 2003. Net loss however was $4.3 million or $0.15 per share while last year the company enjoyed net income of $18.2 million or $0.60 per diluted share.

Addressing the period, Bernard Goldstein, chairman and CEO, said, "Like most growing businesses, we experienced a year that presented unique challenges. However, we relied on our strong management team and proven operational approach to produce record annual adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) as we continue on our path of growth."

Tim Hinkley, president and COO, said that the company would target areas where players’ club members declined with an aggressive promotional program.

The company’s shares were downgraded by gaming analyst Harry Curtis of JP Morgan Co.

THE INSIDER: Robin Farley, chief gaming analyst for UBS, has lowered her target price for Wynn Resorts Inc. (WYNN) to $45.50 from the previous $49. She said she felt the Macau competition from MGM MIRAGE Inc. was the cause of her lowering assumptions.

Harrah’s New Orleans Casino, Louisiana’s only land-based casino, reported record revenues for the month of May. The company said the casino generated $27.8 million, up 9.4% over last year.

The Menominee Indian Tribe of Wisconsin has submitted a three-year plan to build an $808 million casino and entertainment project at Dairyland Greyhound Park in Kenosha. Assisting with the development is the Mohegan Tribe of Connecticut.

Class action lawsuits against Alliance Gaming Corp. (AGI) have been filed charging the company and "certain of its officers and directors" with violations of the Securities Exchange Act of 1934.

Caesars Entertainment Inc. (CZR) has completed the sale of the Las Vegas Hilton Hotel/Casino to Colony Capital LLC.

Low water levels of the Missouri River has prompted Argosy Gaming Inc. (AGY) to end its decade-long practice of cruising with its riverboat casino the Argosy Casino in Sioux City, Iowa.

Colorado casino revenues were up 10.9% during the month of May from the previous month and up 2.4% from a year earlier.

Mikohn Gaming Corporation’s (MIKN) CasinoLink management system has been chosen for the Porto Carras Grand Casino Resort in Haikidki in northern Greece.

International Game Technology (IGT) officials say they remain comfortable with street estimates of $1.32 a share in earnings for fiscal 2004. Also, the company said it will pay a dividend of $0.10 a share on July 13 to shareholders of record on June 29.