Friday, March 12, 2010

Casinos: MGM Mirage Reveals "Exit Strategy" Out of Atlantic City

Now that the New Jersey gaming control board has made it clear that MGM Mirage isn't welcome in Atlantic City any more (as long as it wants to do business in Macau) (H/T to Hunter), they've reached a settlement with the state to let go of its 50% stake in Borgata.

The deal was driven by the division's recommendation to the New Jersey Casino Control Commission last year that MGM Mirage's partner in the Chinese gambling district of Macau, Pansy Ho, be found unsuitable because of allegations her father Stanley Ho has had ties to organized crime.

The division recommended that MGM Mirage be directed to disengage from any business association with Pansy Ho. MGM Mirage instead chose to maintain its casino partnership in Macau and at least temporarily exit the New Jersey market.

Las Vegas-based MGM Mirage had previously disclosed settlement talks were under way focusing on placing the company's New Jersey interests into a divestiture trust. Under today's settlement, which is subject to approval of the New Jersey Casino Control Commission:

-- MGM Mirage's interest in the Borgata and the land will be placed into a divestiture trust and the interest is to be sold within 30 months.

-- MGM Mirage will cease doing business as a gaming licensee in New Jersey, but can re-apply for a license there 30 months after the sale

"We have the utmost respect for the DGE but disagree with its assessment of our partner in Macau," Jim Murren, MGM Mirage chairman and chief executive, said in a statement. "Regulators in other jurisdictions in which we operate casinos have thoroughly considered this matter and all of them have either determined that the relationship is appropriate or have decided that further action is not necessary. Since the DGE takes a different view, we believe that the best course of action for our company and its shareholders is to settle this matter and move forward with the compelling growth opportunities we have in Macau."

Well, what else can MGM do? And perhaps in the long run, this will be seen as a smart move. We all know just how lucrative of a gaming market Macau is quickly becoming. And with both Wynn Resorts and Las Vegas Sands now saying they're "primarily Asian companies doing some business in America", how can MGM be blamed for picking Macau over the rather thorny situation in Jersey.

And speaking of Jersey, Atlantic City continues to be in a free fall... Even as we recover here in Las Vegas and other big US gaming destinations are also seeing signs of recovery. But then again, not all of Atlantic City's problems are directly related to the economy. In particular, AC is now facing the harsh reality of increasing competition from Pennsylvania, New York, Connecticut, Delaware, and Maryland as all these states loosen their anti-gambling laws and allow more gaming (with PA, in particular, posing a real threat with new full hotel-casino resorts opening in or near Philadelphia, AC's biggest "feeder market").

So when we look at the full picture, it's easier to see why MGM is ready to leave AC. With increasing gambling options all over the Northeast, it's becoming increasingly difficult to see how AC can remain top dog. And at least now, MGM no longer has to worry about it.

1 comment:

  1. MGM-Mirage made the correct decision leaving New Jersey as the state is clearly too overly-regulated, overtaxed and obviously doesn’t understand nor have the unique working relationship gaming has with regulators as it does in Nevada. New Jersey’s short-sighted and narrow view of gaming has inhibited its citizens the many needed jobs the state could likely use provided by new gaming projects.