PHILADELPHIA Billionaire investor Kirk
Kerkorian's Tracinda Corp. said on Monday it will explore
strategic options for its 56 percent stake in MGM Mirage Inc.
and will enter talks to purchase the No. 2 U.S. casino
operator's two most prize properties.
Tracinda said putting its majority stake in MGM Mirage up
for sale could result in a financial restructuring or sale of
the rest of the casino company. Shares of MGM Mirage surged 14
percent to $71.80 in electronic trading after closing at
$62.95, up 15 cents on the New York Stock Exchange.
Tracinda said it has made no decision on any restructuring
transactions for MGM Mirage, and reserved the right not to
pursue any deals.
Tracinda also said it will enter negotiations to buy MGM
Mirage's Bellagio Hotel and Casino, and CityCenter properties
in Las Vegas.
MGM Mirage said its board will review Tracinda's
statements, which were filed with securities regulators and
evaluate the implications for the company. MGM Mirage, which
will hold its annual shareholder meeting on Tuesday, said it
would respond in due course.
The company owns and operates 19 properties in Nevada,
Mississippi and Michigan, and has investments in three other
properties, MGM Mirage has a market capitalization of $17.8
The Bellagio generates the greatest cash flow among the
casinos on the Las Vegas strip, analysts said. CityCenter is
MGM Mirage's latest Las Vegas development, located between the
Bellagio and Monte Carlo resorts at the busier end of the
Last month, MGM Mirage said the CityCenter project would be
larger and more costly than it had previously estimated, with
the construction tab hitting $7.4 billion, excluding land and
preopening expenses. CityCenter is slated to open in November
The project will include 2,700 private residences, a
Mandarin Oriental luxury boutique hotel, a 4,000-room resort
casino and a 470,000-square-foot retail and entertainment area.
Despite the cost overruns, analysts said confidence about
CityCenter's prospects increased when MGM Mirage raised its
estimate of gross proceeds from the sale of residential units
to $2.7 billion from $2.5 billion.
BIG BETS ON CASINO MERGERS
"I still feel very comfortable with my $85.50 (stock price)
target as a minimum value for the company," said Jefferies &
Co. analyst Larry Klatzkin, who said he has the highest price
target of his peers on MGM shares and believes the stock is
A sale or restructuring of MGM Mirage would follow a wave
of mergers in the gaming sector. Harrah's Entertainment Inc.,
the world's largest casino operator, was recently acquired for
$17.1 billion by two private equity firms.
Meanwhile, Station Casinos Inc. announced plans in December
for a $4.7 billion management-led buyout. Trump Entertainment
Resorts Inc. hired Merrill Lynch as a financial adviser to help
weigh strategic options, such as refinancing or selling some or
all of its Atlantic City casinos, according to media reports.
In January, Tracinda tried to increase its stake in MGM
Mirage to more than 61 percent, but failed to buy all the
shares it wanted. It currently owns 56 percent.
Kerkorian's Tracinda recently was among the bidders vying
for DaimlerChrysler AG's money-losing Chrysler Group. Cerberus
Capital Management won the hand of Chrysler last week, but a
source familiar with the situation said Kerkorian has not
dropped his bid for Chrysler.
(Additional reporting by Lisa Baertlein)