Boyd Gaming won't buy rest of Borgata

AP News
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Posted: Oct 25, 2010 4:28 PM
Boyd Gaming won't buy rest of Borgata

Boyd Gaming said Monday it won't buy the remaining half of the Borgata Hotel Casino & Spa, Atlantic City's top casino.

The Las Vegas-based company owns half of the Borgata, and had the right of first refusal to buy the remaining half from MGM Resorts International.

Boyd says it's comfortable owning half of the casino-hotel.

MGM chose to sell its half-share rather than cut ties to the family of an Asian gambling mogul suspected of ties to Chinese organized crime. The company has a joint venture casino in Macau with Pansy Ho. Her father, Stanley, has long denied allegations that he is affiliated with Chinese criminal gangs.

MGM said it has received an offer of just over $250 million for its half of the Borgata from a third party it would not publicly identify.

But Boyd said matching that offer would not be in its best interests.

"Given other opportunities and our current focus on de-leveraging our balance sheet, the current offer would not provide a sufficient return on investment for our shareholders," the company said in a news release Monday morning. "Despite this decision, we are confident in the future of Borgata. The property represents a major investment by Boyd Gaming, and it has delivered substantial value for our shareholders.

"We remain comfortable with our current position as managing member and 50 percent owner of Borgata, the region's premier destination resort," the company said.

MGM plans to go through with the sale to its unnamed bidder "as expediently as possible," said Alan Feldman, an MGM spokesman.

The Borgata opened in 2003 as a joint venture between Boyd and MGM, and soon became the dominant casino in the nation's second-largest gambling market. Bringing Las Vegas-style glitz and buzz to the New Jersey seashore, the Borgata touched off a casino arms race here as competitors scrambled to build their own expensive hotel tower additions, renovate hotel rooms and gambling floors, and concentrate on top-name entertainers.

But the trend also pushed at least three second-tier casinos here to the brink of insolvency.

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Boyd's third-quarter profit was $5.6 million, or 6 cents a share, down from $6.3 million, or 7 cents a share, a year earlier.

Matthew Jacob, an analyst with Majestic research, said the Borgata has not been immune to the forces working against Atlantic City, particularly stiff competition from casinos in neighboring Pennsylvania.

"The property's net revenues have declined consistently over the past few years, as it has faced pressure from competition in Pennsylvania and the weakened economy," he wrote in a research report pegged to Monday's earnings announcement. "Competition for the Borgata _ and the Atlantic City market as a whole _ continued to heat up with the introduction of table games in Pennsylvania in July 2010, potentially worsening the situation for Atlantic City by drawing from an already-strained pool of gamers."

Boyd's stock closed Monday at $8.38 a share, up 39 cents or 4.88 percent.