- The Washington Times - Friday, June 11, 2004

LAS VEGAS (AP) — Mandalay Resort Group rejected MGM Mirage Inc.’s $4.85 billion cash buyout offer that would have created the largest casino company in the world, saying yesterday that the $68-per-share bid was insufficient.

“The terms of the MGM Mirage proposal asked Mandalay shareholders to bear a far disproportionate share of the risk. It is not in the best interest of Mandalay shareholders,” Glenn Schaeffer, president and chief financial officer of Mandalay Resort Group, said in a statement.

A week of intense negotiations stalled Thursday when MGM Mirage declined to raise its offer, according to a source close to the talks.

Mandalay, which owns and operates 11 casinos in Nevada, including Luxor and Circus Circus, had until yesterday evening to formally respond.

MGM, whose properties include the MGM Grand Hotel and Casino and Bellagio, surprised the market by going public with the offer June 4 amid friendly but unsolicited talks with Mandalay.

Investors sent Mandalay shares surging, in anticipation of a better offer, from MGM or another bidder, but neither surfaced.

The blockbuster combination would have given MGM Mirage control of 10 properties on the famous Las Vegas Strip, owning about half the 73,000 hotel rooms of the world’s premier gambling venue. The company would surpass rivals Harrah’s Entertainment and Caesars Entertainment, with more than $6 billion in revenue.

In rejecting the offer, Mr. Schaeffer said, “Mandalay’s earnings power is on a decided upswing, represented by a string of record quarterly results. Our track record for expansion, innovation and strong profit margins speaks well for our strong future.”

Last week, Mandalay reported that first-quarter earnings almost doubled to $87.3 million, as revenue rose 18 percent, surpassing analysts’ expectations.

Analysts speculated that the bidding for Mandalay could reach as high as $80 per share.

But once it was disclosed that the $68-per-share offer came at the end of friendly but unsolicited negotiations, analysts revised and sharply lowered their estimates.

Mandalay stock traded at $68.42 Thursday, slightly above MGM’s offering price and off a recent high of $70.23 reached Monday.

MGM Mirage stock closed at $47.60 Thursday on the New York Stock Exchange.

U.S. markets were closed yesterday in observance of the national day of mourning for former President Ronald Reagan.

MGM Mirage owns or operates 12 casinos in Nevada, New Jersey, Mississippi, Michigan and Australia, and has investments in two other resorts in Nevada and New Jersey.

In addition, the company has a 25 percent interest in British casino developer Metro Casinos Ltd.

Mandalay Resort Group has about 15,000 rooms on the Strip. It has ownership in other properties in Nevada, Illinois and Michigan, and owns a hotel-casino in Tunica County, Miss.

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