Investors were conflicted last month when developments at MGM Mirage seemed to be pulling in two directions.

Largest shareholder Kirk Kerkorian—at 56 percent—dealt the company’s stock a blow when he announced that his investment vehicle, the Tracinda Corp., was withdrawing its offer to buy the Bellagio and the under-construction CityCenter. The original offer would have restructured the company and made additional financing necessary in some cases.

When the announcement was initially made, the company’s stock soared more than 25 percent. Last’s month’s termination of the offer sent the stock plunging more than 10 percent before settling down 6 percent.

The reason Tracinda withdrew the offer was an announcement made less than an hour earlier, when MGM Mirage announced the formation of a joint venture agreement with Kerzner International to develop a casino resort on land it recently bought on the northern end of the Las Vegas Strip. The as-yet-unnamed Kerzner resort would go on 40 acres of the 78 acres owned by MGM Mirage at the intersection of the Strip and Sahara Ave., across the street from the Sahara and near the new Echelon Place, which just broke ground last week (see page 10), the proposed Fontainebleau and the recently announced Crown casino resort. Part of the land is the site of the original El Rancho, one of the first resorts built on the Strip area of Las Vegas in the 1940s.

Kerzner has been trying to enter the Las Vegas gaming market for more than a decade. At one point, the company had decided to buy the Desert Inn, the current site of Wynn Las Vegas, but backed out of the deal.

MGM Mirage CEO Terry Lanni told the Las Vegas Review Journal that Kerzner contacted the company soon after it acquired the land in May.

“They were pretty close to concluding a transaction for another property when they heard about our deal,” Lanni said. “They contacted us, looked at the site, and then got in touch with us again 10 days later. This deal greatly enhances the value of the real estate on that part of the Strip.”

The Kerzner flagship is the Atlantis Casino Resort in Nassau, the Bahamas, a spectacular water-themed resort that has transformed the way island resorts are viewed. The company also led the development of the Mohegan Sun tribal casino in Connecticut and has recently reached an agreement to help develop a casino for the Mashpee Wampanoag tribe in Massachusetts. The company also owns an non-gaming, luxury destination hotel product called One&Only Resorts.

After years of being known as Sun International, the company changed its name to Kerzner International several years ago, and just last year went private with financing assistance from Colony Capital.

Kerzner will be responsible for the planning, financing, construction and operation of the Las Vegas Strip resort, while MGM Mirage will contribute the land, valued at $20 million an acre.

In a statement, Tracinda cited the Kerzner development as part of the reason it was withdrawing its offer. The joint venture demonstrated “there is significant potential to unlock value for the company’s shareholders through a variety of strategic transactions.”

By Casino Connection Staff

Please login to post your comments.