MGM’s plan to exit Borgata is approved

ATLANTIC CITY - MGM Mirage Inc.'s plan to sell its 50 percent stake in the Borgata Hotel Casino & Spa here because of overseas business ties that have been linked to organized crime was unanimously approved this morning.

The New Jersey Casino Control Commission, in a session that lasted less than 15 minutes, signed off, 5-0, on the settlement reached Friday between MGM and the state Division of Gaming Enforcement that has MGM selling its half-share in Atlantic City's most profitable casino.

MGM has been in a joint-venture ownership with Boyd Gaming Corp., with MGM the silent partner and Boyd the operator.

Also at this morning's meeting, the commission named James R. Zazzali, retired chief justice of the New Jersey Supreme Court, trustee of MGM's sale of its share.

Under the settlement, MGM will transfer its 50 percent stake into a divestiture trust, of which MGM will be the sole beneficiary.

The trust will be responsible for selling MGM's interest within 30 months. The company will have the right to direct the trustee during the first 18 months; the trustee will be responsible for the sale after that.

The agreement with the state also calls for MGM-owned land leased by the Borgata to be put into the trust and sold in that same period.

"Is this the perfect solution?" asked commission chair Linda Kassekert. "No compromise is, but so long as the commission is satisfied that the essential purposes and policies of the [New Jersey Casino Control] Act are not offended by the practicalities that this outcome affords, I, as one commissioner, believe that we may proceed. . . ."

For more than a year, MGM has been the focus of an investigation by the Division of Gaming Enforcement over its business dealings with Pansy Ho, the daughter of a Macau gambling titan with alleged ties to organized crime. The partnership has called into question MGM's suitability to maintain a casino license in New Jersey.

MGM and Ho developed a 50-50 joint venture in 2005 to build casinos in Macau, including the $1 billion MGM Grand Macau casino, which opened in fall 2007. The venture, called MGM Grand Paradise Limited, allowed MGM to enter the rapidly growing Macau market by purchasing a casino subconcession from Ho.

The South China gambling enclave was cited as the reason why MGM was now divesting the Borgata. The firm said last month that it wanted to apply its resources toward Macau, where it hopes to build additional casinos.

"We believe that this is an essential step forward to enable the company to move ahead with its plans for an IPO in Macau," Andrew Zarnett, Deutsche Bank AG gambling analyst, said in a note to investors Friday. "Should the Casino Control Commission approve this settlement, management can then look to dispose their 50 percent stake in a more favorable capital market environment, given the 30-month time period."

MGM isn't the only company looking to abandon Atlantic City ties and invest elsewhere.

Pinnacle Entertainment Inc. of Las Vegas declared on Feb. 5 that it was abandoning its own plans for a $1.5 billion mega-casino on the Boardwalk where the former Sands Hotel Casino once stood. Pinnacle said it wanted to focus on its more profitable riverboat casinos in places such as St. Louis and was selling the Boardwalk land.