MGM Mirage announced late Friday that it has offered to buy Mandalay Resort Group for $7.65 billion.
"The combination of these two great companies would provide Mandalay shareholders with a premium price for their shares and provides several strategic benefits to shareholders in MGM Mirage," MGM Mirage Chairman Terry Lanni said in a prepared statement.
MGM Mirage is offering to pay $68 per share in a cash transaction that would include the assumption of about $2.8 billion in debt. The offer was announced the day after Mandalay Resorts reported record quarterly earnings, with net income jumping more than 80 percent to $87 million.
Although the proposed merger was announced after the markets closed Friday, both companies' shares ended the day higher.
Mandalay Resort Group closed at $60.27, up $5.65 or 10.3 percent, on 6.4 million shares traded, four times the normal trading volume. MGM Mirage closed at $46.03, up $1.50 or 3.4 percent, on 1.4 million shares traded, double the normal trading volume.
In a statement late Friday evening, Mandalay said it received and will carefully evaluate the proposal from MGM Mirage and will respond in due course. The statement also said the company does not intend to make any further comment on the matter until it is resolved.
One analyst, however, explained the impact the deal could have on the gaming industry.
"The deal, if it's done, is going to create the biggest gaming company in the world. It increases MGM's presence on the Strip tremendously," said Brian Gordon, spokesman for Applied Analysis, a Las Vegas-based financial consulting firm.
MGM Mirage is expected to have more than $4 billion in revenue this year and Mandalay Resort Group is expected to have more than $2.6 billion in revenue.
After the merger, the combined company would operate more than half of the approximately 72,000 hotel rooms on the Strip.
On the Strip, Mandalay Resort Group operates almost 21,000 rooms at Mandalay Bay Resort, The Hotel, Luxor, Excalibur, Circus-Circus, Monte Carlo and the Four Seasons at Mandalay Bay.
MGM Mirage operates almost 17,000 rooms at the Bellagio, MGM Grand, The Mirage, Treasure Island, New York-New York and the Boardwalk Hotel.
More than just the number of rooms, however, Gordon said the buyout would add a new dimension to MGM Mirage's business by giving it a major convention center, something MGM Mirage has been lacking.
MGM Mirage owns casino resorts in Laughlin and Primm in Nevada as well as properties in Biloxi, Miss., and Detroit. It also owns the Borgata in Atlantic City in a joint venture with Boyd Gaming Corp.
Mandalay Resort Group owns properties in Reno, Laughlin, Jean and Henderson in Nevada, as well as the Gold Strike in Tunica, Miss. It partially owns a riverboat in Elgin, Ill., and MotorCity Casino in Detroit.
Deutsche Bank analyst Marc Falcone pointed out that one of the companies probably would have to divest its Detroit asset for the deal to work.
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