MGM is the world's second-largest casino operator. As a result of the deal, Dubai World is emerging as one of the most powerful gaming companies in the world.
According to Sultan Bin Sulayem, chairman of Dubai World, the company is very interested in MGM because of its asset base, worldwide locations, and global brands. The deal, he said, will create an even more powerful global brand. "The announcement brings together two companies known for creating landmark developments that have the ability to change the face of luxury living and destination tourism," said the sultan.
The deal was reached last week and is worth $5 billion. Dubai World is the government of Dubai's holding company. The firm will receive 14 million shares at a price of $84 per share, and is slated to receive another 14 million shares. "This is a sea-change for the company," said Terry Lanni, chief executive officer of MGM.
On the news, MGM shares rose 9.5 percent, according to Wall Street analysts.
Public Shares
"Dubai World has agreed to take no more than a 20 percent stake -- ensuring that MGM retains its listing with a sufficient float of public shares," said Lanni.The casino is majority-owned by billionaire Kirk Kerkorian, who also owns the Bellagio in Las Vegas and about 50 percent of the major properties on the Las Vegas strip, and the shares are publicly traded.
In addition to the investment in MGM Mirage, Dubai World is also spending another $2.7 billion for a 50 percent share in MGM's City Center Resort in Las Vegas. The resort features hotel condominiums on the Vegas strip. The deal was facilitated by Sol Kerzner, the South African gambling mogul, whose firm owns 27 percent of MGM Mirage.
According to Lanni, the deal with Dubai World will make the balance sheet better for MGM Mirage, and will further growth in the Middle East. There will be more joint ventures in the offing, he promised. MGM reported revenues of $1.9 billion during the second quarter of this year, according to company filings with the Securities and Exchange Commission (SEC).
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