Steve Marcus  /  Reuters file
MGM Mirage Inc. raised its bid for Mandalay Resort Group, offering $71 a share. A deal between the two casino operators would create the largest casino company in the world.
updated 6/14/2004 12:34:40 PM ET 2004-06-14T16:34:40

MGM Mirage Inc. has raised its bid for rival casino operator Mandalay Resort Group only days after its previous offer was rejected as insufficient, pushing ahead with its effort to create the biggest gambling company in the world.

MGM Mirage said Monday the two sides had agreed on “all material terms” of the revised $4.8 billion cash offer after intense weekend discussions.

Mandalay said it hadn’t entered an agreement but said the new terms would “offer significantly greater assurances of closing” for its shareholders. Mandalay will present the revised offer to its board Tuesday.

Under the latest offer, MGM Mirage would pay $71 per share in cash for Mandalay stock, up from its earlier offer of $68 a share.

MGM Mirage said the cash price represents a 30 percent premium to Mandalay’s closing share price on June 3, the day before the company’s initial offer was made.

In addition to the $4.8 billion in cash, MGM Mirage said the new deal would include $600 million in convertible debentures and that it would assume $2.5 billion in debt.

John Mulkey, a Bear Stearns gambling analyst in New York, said it appeared Mandalay would accept the deal.

“We believe that management for both companies hammered out their differences over the weekend and that Mandalay’s board is likely to approve this final proposal,” Mulkey wrote Monday in an investor’s note.

In rejecting the previous bid on Friday, Mandalay’s president and chief financial officer Glenn Schaeffer said the terms had “asked Mandalay shareholders to bear a far disproportionate share of the risk” and was not in their best interest.

The deal killer was a demand by MGM Mirage requesting a 15-month option to pull out of the agreement. During that time, Mandalay would have been prevented from making any financial or strategic moves.

MGM Mirage would have paid a $100 million breakup fee if the deal didn’t close in 15 months.

A source close to negotiations who spoke on condition of anonymity said Monday that MGM Mirage had withdrawn that option.

Any deal would need approval by federal regulators as well as by regulators in Nevada and other states in which the two have casinos.

MGM’s properties include the MGM Grand, The Mirage and Bellagio. Mandalay owns and operates 11 casinos in Nevada, including Mandalay Bay, Luxor and Circus Circus.

A combination of the two companies would give MGM Mirage control of 10 properties on the Strip, owning about half the 73,000 hotel rooms of the world’s most lucrative gambling market. The company would surpass rivals Harrah’s Entertainment and Caesars Entertainment, with more than $6 billion in revenues.

MGM Mirage owns or operates 12 casinos in Nevada, New Jersey, Mississippi, Michigan and Australia, and has investments in two other resorts in Nevada and New Jersey. It has a 25 percent interest in British casino developer Metro Casinos Ltd.

Mandalay Resort Group has about 15,000 rooms on the Strip. It has ownership in other properties in Nevada, Illinois and Michigan, and owns a hotel-casino in Tunica County, Miss.

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