Wall Street Journal
Dec 28 2007
Dubai World Increases MGM Mirage Stake
By DONNA KARDOS
December 28, 2007 7:06 a.m.
Dubai World increased its stake in casino operator MGM Mirage to 6.5%
after agreeing to buy five million shares from a foundation founded
by MGM controlling shareholder Kirk Kerkorian.
Dubai World, a holding company for the Persian Gulf state that
previously held a 5% stake in MGM, bought its additional shares from
the Lincy Foundation for $424 million, or $84.80 a share. The deal
was announced Friday in a filing with the U.S. Securities and
Exchange Commission.
In the filing, Dubai World said the purchase was for investment
purposes. The company manages the government of Dubai’s business
projects, includes the private-equity powerhouse Istithmar and a big
investment portfolio.
Mr. Kerkorian founded the Beverly Hills-based Lincy Foundation after
the devastating 1988 Armenian earthquake. He is of Armenian descent.
In the filing, Dubai World said it has no current plans, proposals or
agreements to acquire additional shares from significant
stockholders, but that they may purchase additional shares at any
time and from time to time in open market purchases, privately
negotiated purchases or otherwise. As per a stock purchase agreement,
Dubai World will not be able to acquire more than a 20% stake in MGM.
The move comes four months after MGM’s board approved a deal under
which Dubai World would pay $2.7 billion to acquire a 50% stake in
CityCenter, a 76-acre development in Las Vegas of upscale hotels,
condos and retail slated to open by 2009. The agreement also called
for Dubai World to buy 14.2 million shares from MGM Mirage at a price
of $84 a share, or about $1.2 billion, and an additional 14.2 million
shares from public shareholders at about the same price. The
purchases would have given Dubai World a 9.5% stake in MGM.
But investors shunned Dubai World’s offer, as the offer price was
well below what holders could get on the open market. Just 348,903
shares were tendered by shareholders. Combined with the purchase from
MGM, Dubai World held a 5% stake.
MGM, Kerzner International Holdings Ltd. and Istithmar Hotels FZE
finalized joint-venture agreements in September to develop a
multibillion dollar Las Vegas resort that now includes participation
by Dubai’s investment arm. Dubai World is Istithmar’s parent.
Dubai World is getting into the gambling business without building
casinos in Dubai, where gambling is illegal.
Shares of MGM closed Thursday at $84.25. There was no pre-market
activity.