Casino co. MGM Resorts, Kerkorian selling shares

AP News
Posted: Oct 12, 2010 8:37 PM
Casino co. MGM Resorts, Kerkorian selling shares

Casino giant MGM Resorts International said Tuesday that it plans to issue up to 47 million shares of common stock, while billionaire investor Kirk Kerkorian, its largest shareholder, is selling nearly 32 million of the shares he holds in the company.

Las Vegas-based MGM Resorts also said Tuesday that it has received an offer of more than $250 million for its half of the Borgata Hotel Casino & Spa in Atlantic City, N.J. MGM Resorts spokesman Gordon Absher declined to say who made the offer.

Kerkorian's Tracinda Corp., which now owns 37 percent of MGM Resorts' outstanding shares, said it would sell 27.8 million shares to other investors and give underwriters Barclays Capital Inc. an option to buy an additional 4.17 million shares.

MGM Resorts is issuing nearly 41 million shares and giving Barclays an option to buy 6.14 million more.

The 47 million new shares amount to a nearly 11 percent increase in MGM Resorts' outstanding shares. If both MGM Resorts and Kerkorian sell all the shares they have offered and Barclays fully accepts both options, Kerkorian would be left with just under 27 percent of the company.

MGM Resorts said it plans to use proceeds from the sale of its new shares for general corporate purposes, including reducing debt. The shares Tracinda offered Tuesday were worth $434.8 million at the day's closing stock price.

The company said it would not get anything from Kerkorian's sale.

Its shares fell 81 cents, or 6 percent, to $12.80 in after-hours trading after ending the day up 13 cents to $13.61.

Tracinda said in a statement that it's not seeking "other strategic alternatives" for its investment, echoing language it used nearly one year ago when it said it might cut its stake in the company.

"Tracinda believes that there is substantial value in the assets of the company and that MGM Resorts is a good long-term investment," Kerkorian's investment firm said Tuesday.

When Tracinda revealed its intentions last October, MGM Resorts CEO Jim Murren told The Associated Press it appeared that Tracinda was moving from a passive investor to one that would take a more active role in trying to drive up shareholder value.

The company's announcement of the offers and sale also included a forecast for third-quarter earnings. MGM Resorts expects to report a loss of 72 cents per share, compared with a loss of $1.70 per share a year earlier. Analysts surveyed by Thomson Reuters on average expected a loss of 69 cents per share.

The loss of $317.2 million compares with a loss of $750.4 million during the third quarter last year. MGM Resorts said this year's quarter includes writedowns totaling $357 million, or 51 cents per share, on its investment in CityCenter, its joint venture casino complex with Dubai World on the Las Vegas Strip, as well as CityCenter's residential units and the Borgata.

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The sale of MGM Resorts' half of the Borgata is not unexpected, as the company has been trying to get rid of its interest in Atlantic City since New Jersey regulators disapproved of its ties in Macau to Pansy Ho, the daughter of casino executive and suspected organized crime figure Stanley Ho. MGM Resorts has defended its ties to Pansy Ho, but chose to leave struggling Atlantic City instead of China and the world's top gambling market.

MGM Resorts said it is offering Borgata partner Boyd Gaming Corp. the same terms to buy the 50 percent stake as required by their joint venture agreement. MGM Resorts said Boyd has 30 days to take the offer or object to the sale. If Boyd accepts, the companies could close a deal three to six months after that, MGM Resorts said.


AP Business Writer Ryan Nakashima in Los Angeles contributed to this report.