Las Vegas Review-Journal, NV
Feb 25, 2005
STATE REGULATORS VOICE CONCERNS: MGM-Mandalay deal OK’d
Kerkorian says competition in casino market will stay strong
By HOWARD STUTZ
GAMING WIRE
MGM Mirage Chairman Terri Lanni, left, and majority stockholder Kirk
Kerkorian talk during the Nevada Gaming Commission hearing Thursday.
Kerkorian assured state regulators that the buyout of the Mandalay
Resort Group will not stifle competition.
Photo by John Gurzinski.
While it was clear from the outset of Thursday’s Nevada Gaming
Commission hearing that MGM Mirage’s $7.9 billion buyout of the
Mandalay Resort Group was going to be approved, state regulators
wanted to spell out their concerns about the anti-competitive aspects
of the transaction more stringently than the Federal Trade
Commission.
After a more than four-hour hearing that resulted in a 5-0 vote in
favor of the merger, commission Chairman Peter Bernhard was satisfied
regulators made their point.
“I viewed the FTC analysis as the beginning of our analysis,”
Bernhard said of the government agency’s decision earlier this month
not to challenge the merger. “We had to go further and look at the
best interests of Nevada. Even if it met federal antitrust standards,
we still had to make the independent judgment that it was in the best
interest of the state based on the criteria of our regulations.”
Once the buyout is completed, MGM Mirage will encompass 28 casinos in
five states with 75,000 employees, 95 percent of whom are based in
Nevada.
On the Strip, the company will own 12 casinos, including eight of the
nine major resorts on the west side of the Las Vegas Boulevard
between Spring Mountain Road and Russell Road.
The pointed questioning by gaming commissioners of MGM Mirage
executives and attorneys as to whether or not the merger would stifle
competition on the Strip brought the company’s controlling
shareholder, Kirk Kerkorian, to the podium.
The 88-year-old Kerkorian, who began MGM Mirage when he built the
5,000-room MGM Grand in 1993, said the same questions were asked in
2000 when he negotiated the buyout of Mirage Resorts to form the
current company.
Normally a spectator during such hearings, Kerkorian told the gaming
commission that one company couldn’t hold back development in Las
Vegas.
“In the last 4 1/2 years, Nevada has grown rapidly and there has been
more interest worldwide,” Kerkorian said. “I have to believe the same
thing will happen again.”
In a brief interview with the Review-Journal following his remarks,
Kerkorian said Steve Wynn’s planned April 28 opening of the $2.5
billion Wynn Las Vegas, is proof casino development will continue.
“The point I was trying to make was that the same questions were
asked when we purchased Mirage,” Kerkorian said. “Certainly,
everything kept exploding and I don’t think any one merger is going
to hold back Las Vegas. They are going to still keep coming and still
keep building.”
MGM Mirage President and Chief Financial Officer Jim Murren cited the
company’s sale of the Golden Nugget to Poster Financial Group a year
ago, the recent resale of the downtown casino to Landry’s
Restaurants, and last year’s purchase of the Las Vegas Hilton by
Colony Capital as proof new competition will continue to enter the
marketplace.
Commissioner John Moran Jr., said the FTC’s approval didn’t mean all
the questions had been answered. He said the gaming commission was
more concerned about the impact the merger would have on other Nevada
casinos.
“We had to go further and not just be a rubber stamp of the FTC,”
Moran said.
Gaming commission members said the financial data provided by MGM
Mirage showed the company’s commitment to the state.
After its merger with Mirage Resorts, the company said it spent
$1.739 billion in capital expenditures for its Nevada properties
between 2000 and 2004. Company executives said those expenditures
would continue, including the $4.7 billion expected to be spent on
the 66-acre Project CityCenter on the Strip.
“I felt this particular application showed this company’s commitment
to the state of Nevada and showed their responsibility in the past
with their track record following their last merger,” Bernhard said.
During the hearing, it was disclosed the purchase of Mandalay Resort
Group would give MGM Mirage additional acres of undeveloped land with
Strip access, including 22 acres south of Mandalay Bay, 15 acres on
the east side of Strip across from Luxor, 27 acres north of Circus
Circus, and 33 acres behind New York-New York and Monte Carlo.
MGM Grand Chairman and Chief Executive Officer Terry Lanni said after
the hearing he hopes the purchase will be able to close in about two
weeks once two remaining issues are cleared.
MGM Mirage needs to complete the sale of one of its two Detroit-area
casinos in order to satisfy Michigan gaming law, and it must place
Mandalay’s Illinois casino into an escrow trust because that state
doesn’t have a full complement of gaming regulators to rule on the
matter.
Once the merger is completed, Lanni said the company will release a
list of management changes for various casinos. He said during the
hearing that Renee West, president of the company’s three properties
in Primm, would move to a yet-to-be named Strip casino and become the
first woman to be president of a Strip property.
Lanni also attempted to ease the concerns of Mandalay Resort Group
employees about the future.
While key corporate executives are expected to leave, property
employees won’t be affected.
He said Mandalay employees will retain seniority and not be required
to reapply for their positions. Also, health insurance and other
benefits will remain status quo until MGM Mirage managers can assess
both companies’ benefit packages.
“Eventually we will look at what we offer and they offer and
implement best practices,” Lanni said. “We just ask the employees to
judge us by what we did before. In some cases, they may have better
practices.”
Lanni also reiterated MGM Mirage has no plans to sell off pieces of
the Mandalay Resort Group.
“We spent a great deal to ensure that the Federal Trade Commission
did not require us to sell anything and it’s not our intent to sell
any property at this time,” Lanni said. “But as a publicly traded
company, we have a responsibility that if someone were to make an
offer to us, we have to give consideration to that proposal. It would
be the prudent thing to do and our shareholders would expect that.”