MGM faces fight from local players to build Maryland casino

LOS ANGELES Thu Aug 16, 2012 6:18am EDT

LOS ANGELES (Reuters) - MGM Resorts International is battling to expand to Maryland even as race track owners and local casino operators try to block the international gaming giant from opening in the state.

Both Maryland's House of Delegates and Senate voted to approve new gaming expansion legislation on Wednesday that would open competitive bidding for a sixth gaming license in the state's Prince George's County.

Maryland Governor Martin O'Malley, who has said it will generate hundreds of millions of dollars for the state, quickly signed the measure, which now must be approved by voters in a November statewide referendum.

MGM Resorts International (MGM.N) already has an agreement with developer Peterson Cos to build a casino in National Harbor near the Washington, D.C. riverfront.

But the proposed expansion has raised the ire of Penn National Gaming Inc. (PENN.O), a company with a little more than half the market capitalization of MGM, which operates the Hollywood Casino and Rosecroft Raceway harness horse race track, both in Maryland.

Penn National, headquartered in Wyomissing, Pennsylvania, has long wanted a gaming license to add slot machines and revitalize Rosecroft, but now says those plans are scuttled due to a "back-room" deal involving MGM and National Harbor.

"It's pretty clear to us that the fix is in, in Maryland which is shocking," said Penn National CEO Peter Carlino on a recent call with analysts.

"You can appreciate that this will be a very dramatic fight and we're ready for that," he added.

Penn National Gaming reported spending $877,4333 on Maryland lobbyists between November and April, according to the State Ethics Commission. MGM was not listed among the employers who spent $50,000 or more lobbying state officials.

MGM officials acknowledged that they lobbied the governor, who spearheaded the gambling expansion bill.

MGM Resorts CEO Jim Murren has said he plans to invest about $800 million in National Harbor, creating 2,000 construction jobs and up to 4,000 permanent jobs.

MGM spokesman Gordon Absher, denied there were any backroom deals and said, "This bill, and the Maryland process in general, has always had competitive bid.

MGM's plans also faces opposition from the Cordish Cos, which just opened the largest casino in the state, Maryland Live!, in the Arundel Mills Mall shopping Center, located south of Baltimore.

If approved by the voters, the measure would pave the way for Maryland's largest gambling expansion since 2008, when voters voted approved a ballot measure for slot machines at five locations.

"A basic premise of any potential changes to gaming laws in Maryland, especially the addition of a potential new sixth mega-casino, should be fairness to the existing licensees such as us that have made massive investments based on the state's current rules," Joe Weinberg, managing partner for Cordish Cos said in a statement this month before the special legislative session began.

The original bill was amended to appease existing casino operations by giving them deeper tax breaks.

In addition to Maryland Live! and Penn National's Hollywood Casino in Perryville, track Ocean Downs operates a casino in Berlin, Maryland.

Lakes Entertainment is planning a casino at the Rocky Gap Lodge and Golf Resort in Cumberland. Caesars Entertainment Corp is planning a $300 million Harrah's casino in Baltimore. (Edited by Ronald Grover and Leslie Gevirtz)