Succession speculation

Though the MGM/Mandalay merger is not yet consumated, observers are already wondering what will happen to the new company in the event of Kirk Kerkorian's passing away. From the Las Vegas Sun:

But the succession plan for Kerkorian's 57 percent interest in MGM MIRAGE, which could put his shares in the hands of his two daughters, Tracy and Linda, is private and experts appear to have little idea who could end up controlling the largest and most powerful casino company in the world in the event Kerkorian passes away.

Kerkorian, 87, owns 57 percent of MGM MIRAGE shares through Tracinda Corp., a private company that incorporated in Nevada in 1976 and maintains offices in Beverly Hills, Calif. Tracinda Corp. officials declined comment on Kerkorian's plans, saying they wouldn't discuss his "personal business."

MGM MIRAGE spokesman Alan Feldman said he's not aware that the issue of how Kerkorian's shares would be distributed has ever been raised with analysts or investors. Nor has the company ever informed the public about the succession plan, which is private, he said.

Las Vegas SUN: Kerkorian succession issue highlighted by merger offer

People wonder why Kerkorian avoids the spotlight? If you had newspapers speculating about what's going to happen after you died, you might get a little gunshy about facing the media, too.
Just to clarify things: we do NOT have the succession plan on file at the Gaming Studies Research Center, so please don't ask.
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posted by Dave at 3:52 PM

Moving in Macau

Wynn Macau is about to become a reality. From Reuters:

Casino entrepreneur Steve Wynn's Wynn Resorts Ltd. plans to start construction on a $705 million resort in the Chinese enclave of Macau on June 28, the company said in a filing on Thursday.
U.S. operators are eager to invest in Macau, the only legal gambling haven in China, which is reforming laws to entice foreign companies to set up shop.

Deutsche Bank Hong Kong and Societe Generale Asia had underwritten a bank facility of $397 million to finance development and construction of the project, Wynn said.

It set June 28 as the start date on a 26-month construction contract. Design and construction are estimated to be about $425 million of the $705 million project, which will include a 600-room hotel, a Las Vegas-sized gaming floor and a spa, shopping, restaurants and entertainment.

Wynn Resorts is building a new casino in Las Vegas as well as the project in Macau, where Venetian Las Vegas resort owner Las Vegas Sands Inc. already has opened its first casino.

Wynn said that the local legislature had passed a bill to let casinos extend credit and enforce gaming debts in the former Portuguese colony. The bill was expected to be signed into law in June and take effect July 1, it said.


Wynn to start building Macau casino June 28

It looks like Macau is solidifying its position as the leading gaming market in Asia. It will be interesting to see where it is in a few years.
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posted by Dave at 5:14 PM

Smarty likes slots!

I happened to be in Philadelphia last Saturday, the day of the Belmont Stakes, and got a chance to see Smartymania first hand. People in the Delaware Valley almost revere that horse. Some might say that, since he failed to capture the Triple Crown, his luster might have faded, but I think that in a perverse way this only makes him more of a Philly folk hero; in a city where the Eagles have been to the NFC title game (but no further) 3 straight years straight, the Flyers just came up short in the NHL Eastern Conference Finals, and Joe Carter's 1993 home run off Mitch Williams still provokes a wince, Smarty's near-miss makes him the ideal Philadelphian.
Last weekend, I even saw a "Smarty Jones for President" sign somewhere. Laugh at the idea of a horse having political influence all you want, but Pennsylvania slots proponents have trotted out the closest thing to Smarty himself to give their push for slots a rub. From the Inquirer:

During a visit to the state Capitol yesterday, Smarty Jones' trainer, John Servis, made a pitch for legalizing slot machines at racetracks in Pennsylvania, saying gambling revenue could be the difference between his staying in the state or taking an offer to train horses elsewhere.

Servis' remarks come as the legislature is locked in a debate over proposals to expand gambling and speculation grows that the state's celebrity horseman may accept a lucrative offer at a larger track in another state.

"I hate to say 'make or break,' but it is important," said Servis, following appearances on both the House and Senate floors, where the trainer and the rest of the Smarty Jones team were honored for their racing achievements.

Standing at the rostrum generally reserved for the Speaker of the House, Servis, 45, did not make a direct appeal to lawmakers to pass a gambling bill but said Bensalem is his family's home and "that's where we'd like to stay."

Gov. Rendell, who has been leading the effort to bring gambling to as many as eight tracks in the state, made a rare appearance on the House floor to introduce Servis.

Rendell said he joined lawmakers in paying tribute to the Smarty Jones team not only for what the colt achieved on the track but as "ambassadors for Bensalem, the Philadelphia region and the great state of Pennsylvania."

Philadelphia Inquirer | 06/09/2004 | Smarty Jones' trainer campaigns for slots bill

There you have it, straight from the horse trainer's mouth.
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posted by Dave at 8:38 AM

Mega merger mania

More merger news today, as the Federal Trade Commission signed off on Harrah's $1.45 billion acquisition of Horseshoe Gaming:
reviewjournal.com -- Business: FTC lets Harrah's acquisition proceed
I've got some more news on the MGM MIRAGE;/Mandalay deal:
LV Sun: State, federal regulators would review deal

LV Sun: Kerkorian strikes again
Does this mean MGM MIRAGE is "striking back?" So does that make Kerkorian Darth Vader? If so, then who is Luke? How about Chewbacca? I never thought I'd reference Chewy while talking shop, but there's a first for everything.

Finally, news from Detroit, a city that, proportionally, would be more affected by the merger than the Las Vegas Strip:
MGM bid may spur casino shake-up

I've talked to no less than four reporters today from across the country about the proposed deal. If you haven't had your fill of merger madness, tune into KNPR tomorrow morning to hear a commentary I recorded today about the consolidation.
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posted by Dave at 3:32 PM

Just in case...

...you had any doubt, Nevada's top casino executives make more money than you. Here's the list, courtesy of the Las Vegas Sun:

1 and 2: Mandalay Resort Group Chief Executive Michael Ensign and director William Richardson with $46.8 million in total compensation each.
3: Station Casinos Chief Executive Frank Fertitta III, with $28.2 million in total compensation.
4: Station Casinos Chief Financial Officer, Chief Accounting Officer and Treasurer Glenn Christenson, with $18.2 million in total compensation
5: Mandalay Resort Group President and Chief Financial Officer Glenn Schaeffer, with $12.8 mil in total compensation.
6: MGM MIRAGE Chairman and Chief Executive Terry Lanni, with $12.1 million in total compensation.
7: Station Casinos President Lorenzo Fertitta, $9.1 million in total compensation.

Caesars Entertainment Chief Executive Wally Barr earned "only" $2.3 million in total compensation, the least among the heads of the four major casino companies. The Venetian's owner, Sheldon Adelson and Ed Herbst, chairman of Herbst Gaming (the folks who brought you Terrible's) also made $2.3 mil. You know that you are in a good business when making $2.3 million in a year is considered slumming.

Las Vegas SUN: Compensation soars for casino executives
I may be a slacker, but if I was compensated $2.3 million in 2003, let alone $46.8 million, I would probably not be working in 2004.
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posted by Dave at 4:39 PM

Four questions

I spent some time in Atlantic City last week, and I noticed a few minor changes that puzzled me:
1) When, and why, did someone paint the Showboat beige? (the image is of the SB when it first opened; it is definitely beige (or tan) now.

2) Did someone paint the 2nd-oldest Caesars tower beige as well? Why?

3) Why does the Sands look pink at night? Did someone throw something red into the machine the last time through the wash? Does this mean that they are going to excise the worst facade in casino history? Check out a facade detail here.

The fourth question has to do with transportation:

4) Is the tunnel (AKA the Brigantine connector) the most confusing, counter-intuitive road project ever built?

From the completely avoidable crossing at grade with the railroad tracks to the bewildering exits, which seem to alternate right and left at random, this is a pretty convenient road, but a hard one to navigate if you don't know where you are going beforehand. The casinos desperately need to improve their directional signs to get people back to the tunnel. For example, I pulled out of the Trump Marina self-park garage and got into the middle lane, which seemed to head in the direction of the tunnel. But the entrance to the connector was a sudden left exit, which came without a warning. I ended up on the White Horse Pike heading west. If someone didn't have my lifelong knowledge of the area, they would easily end up in Absecon, completely befuddled.
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posted by Dave at 8:46 AM

MGM Mandalay Merger?

One of the trends that I've noticed in the past few years is that alliterative casino companies have a disturbing tendency to acquire each other. Harrah's, to take one example, had bought both Harvey's and Horseshoe. Sure, they bought the Rio and Showboat too, but Harrah's has both an R and an S in it, so the pattern holds. (If Harrah's is out to acquire its entire name in rival gaming companies, I would guess that Ameristar is due for a takeover bid soon.) MGM Grand bought Steve Wynn's Mirage Resorts in 2000.
So it didn't really surprise me that MGM MIRAGE had made an offer to buy the Mandalay Resort Group. From thestreet.com:

MGM Mirage late Friday announced a $4.85 billion cash bid for Mandalay Resort Group (MBG:NYSE - commentary - research), which also calls for the assumption of $2.8 billion in debt, a merger that would create the largest gaming operator in the world -- and one with control nearly half of Las Vegas' hotel rooms. The bid valued Mandalay at $68 a share, a 12.8% premium to Mandalay's close of $60.27 on Friday.

By and large, investors and Wall Street cheered the $7.65 billion bid, which would be the largest in the history of gaming, surpassing MGM's $6.4 billion acquisition of Mirage Casinos four years ago. The deal would create the world's largest gaming company, with MGM/Mandalay leapfrogging Caesars Entertainment

In its press release touting its bid, MGM chairman and CEO said the deal offered a premium price for Mandalay shareholders and "several strategic benefits to shareholders in MGM Mirage." In response, Mandalay acknowledged MGM's proposal, telling investors in a statement the company will respond "in due course" and "does not intend to make any further comment on this matter until it is finally resolved."

Of course, the analysts had something to say:

"If such a transaction were completed, this would be a 'change the landscape' major merger in the gaming industry -- combining the third and fourth largest companies," said Steven Kent, analyst at Goldman Sachs, in a research note.

Indeed, a number of other gaming names were drawing interest on Monday. The Dow Jones Casino Index was up 3.4%, led higher by Caesars, which rose 73 cents, or 5.2%, to $14.85, after Banc of America analyst Jeremy Cogan upgraded the company to buy from neutral, telling investors "the MGM bid for Mandalay could fuel questions of who's next." (Bank of America does and seeks to do business with the companies covered in its research reports.)

"Caesars could be viewed as a more likely potential acquisition candidate, by Harrah's Entertainment , maybe, given its desire for increased Vegas exposure, strong brands and desire to further consolidate the industry," said Cogan.

But Harrah's isn't alone in pushing consolidation. By merging, MGM would be able to consolidate its joint-venture with Mandalay, the Monte Carlo, while becoming especially concentrated in the surging Las Vegas market. MGM Mirage fully owns five properties in Las Vegas, including the MGM Grand, the Mirage, the Bellagio, Treasure Island and New York-New York, while Mandalay fully owns five of its own, including Mandalay Bay, Luxor, Circus Circus, Excalibur and Slots-A-Fun.

With so many Las Vegas properties, a combined MGM/Mandalay would completely dominate a two-mile segment of the Strip stretching from the Mandalay Bay casino all the way to New York-New York.

According to estimates from Prudential Equity Group, MGM/Mandalay would have nearly $7.5 billion in annual revenue and $2 billion in annual EBITDA, with interests in 29 different properties and large tracts of land in Atlantic City and Las Vegas. All told, the combined companies would control 44% of the hotel rooms in Las Vegas.

Actually, MGM/Mandalay's fiefdom on the west side of the Strip would stretch from Russell Road, south of Mandalay Bay, to the Bellagio, almost completely unbroken; north of Caesars, the company's empire would continue with Mirage and TI. If history is any guide, the company would probably sell off Circus Circus, much as MGM MIRAGE has shed Mirage Resort's original casino, downtown's Golden Nugget.

So is this really going to happen? Analysts think it is likely:

"Our sense is that this is a friendly transaction," said Michael Rietbrock, analyst at Citigroup Smith Barney. "If we had to guess, we'd expect that the two sides have been conducting late-stage discussions, which were disclosed, in part, due to the extremely strong market reaction to Mandalay's first-quarter earnings Friday ... MGM's one likely frustration is that Mandalay has time its sale very well."

While seemingly friendly, analysts caution the deal is not a slam dunk. For starters, with Mandalay in play, analysts say either Caesars or Harrah's could step forward with a bid of their own.

Mandalay Jumps on MGM Mirage Offer

Just out of curiosity, a Harrah's acquisition of Caesars would create something bordering on a market-dominating monopoly in Atlantic City, where the companies together own 5 or 6 casinos (depending on whether you still consider the Claridge a separate property, which it technically isn't) out of 12.
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posted by Dave at 8:45 AM