Dubai World to pump $5.1 billion into MGM

http://www.latimes.com/business/la-fi-vegas23aug23,1,6169499.story?coll=la-headlines-business

Dubai World to pump $5.1 billion into MGM
By Kimi Yoshino
Los Angeles Times Staff Writer
August 23, 2007

The Persian Gulf emirate of Dubai anted up Wednesday, announcing it would invest $5.1 billion in MGM Mirage for a 50% stake in the massive Las Vegas CityCenter project now in development and a 10% interest in the gaming company.

The deal continues Dubai's investments in name-brand and hospitality destinations around the world, but also infuses Las Vegas-based MGM Mirage with cash to quickly pursue other projects without being laden with debt.

Under the terms of the agreement, Dubai World, the holding company for the emirate, will invest $2.7 billion in the 76-acre CityCenter, a densely packed collection of condos and hotels on the Vegas Strip, considered the country's largest privately funded construction job.

Dubai World will also buy 28.4 million shares of MGM Mirage for $84 a share, a 13% premium over its Tuesday closing price of $74.32.

"Dubai World is looking to invest in projects that make good business sense, and which employ our expertise in developing large scale mixed-use projects with a strong focus on leisure and hospitality," the holding company said in a statement. "This investment is in line with our objective to only partner with 'the best' and MGM is one of the world's leading entertainment companies and hotel resort operators."

For MGM Mirage, it connects the company to the elite tourists who frequent Dubai.

"We're very excited," said Terry Lanni, chief executive of MGM Mirage. "The cross-fertilization, cross-marketing of brands... will be valuable. I would like to see us marketing in Dubai to visitors coming into Dubai. These are people with significant net worths. One development they plan [in Dubai] will be villas with your own hangars for your private planes and these are not little planes."

There are no immediate plans to build an MGM Mirage property in Dubai, though any project would be non-gaming, Lanni said, because gambling is illegal in Muslim-dominated Dubai, part of the United Arab Emirates.

Beyond that, Lanni said the cash investment gave MGM Mirage a "significantly enhanced" balance sheet as it relates to CityCenter.

"With that comfort, we'll be able to move along other projects that otherwise would have waited awhile," he said. "Usually, you get financing, build it, open it, get cash flowing . . . and build another one."

CityCenter is to open by the end of 2009.

MGM Mirage, one of the world's leading gaming companies, owns and operates 17 properties in Nevada, Mississippi and Michigan. New developments are also underway in Macao, China. On news of the deal Wednesday, shares of MGM Mirage surged $6.62, or 8.9%, to $80.94, their biggest jump since May.

Billionaire Kirk Kerkorian's Tracinda Corp. -- a Beverly Hills investment firm -- holds a 54.1% stake in MGM Mirage; the Dubai World deal is expected to reduce that to about 51.65%.

kimi.yoshino@latimes.com