MGM Resorts to Acquire Borgata from Boyd Gaming
MGM Resorts International and MGM Growth Properties LLC announced Tuesday that MGM Resorts has agreed to buy Boyd Gaming Corporation’s 50 percent stake in the famed Borgata Hotel Casino & Spa in Atlantic City for $900 million. Boyd and MGM had each previously owned half of the Borgata via their joint venture, Marina District Development Company, LLC.
The deal has several moving financial parts, so we will see if we can wade through the details. The actual monetary sum that will be going from MGM to Boyd will be around $600 million in order to account for Boyd’s share of the Borgata’s $600 million in outstanding debt. MGM will take on that debt and refinance it.
Boyd Gaming CEO Keith Smith said that the deal “is an attractive opportunity to immediately unlock significant value for our shareholders.”
Once that purchase is completed, MGM Resorts will then turn around and sell the Borgata to MGM Growth Properties, a real estate investment trust (REIT) and subsidiary of MGM Resorts, for approximately $1.175 billion. MGM Growth Properties, in turn, will lease the Borgata to MGM Resorts for $100 million per year with slight increases each year through 2022.
That is a lot of wheeling and dealing, but Dan D’Arrigo, Executive Vice President and CFO of MGM Resorts International, is confident that it will all work out well for his company, saying in a press release, “The Transactions provide numerous benefits to MGM Resorts and creates significant value for our shareholders. We expect MGM Resorts to remain net leverage-neutral, as we fully consolidate Borgata’s cash flows into the MGM Resorts portfolio. Looking ahead, we believe the impact of the Transactions remain consistent with our focus on further deleveraging the balance sheet.”
In that same press release, MGM Resorts International Chairman and CEO Jim Murren expressed his excitement about the acquisition:
Borgata is the premier resort in Atlantic City and a great addition to our growing presence in the Northeast. While the market continues to experience challenges, Borgata has outperformed and differentiated itself as the undisputed leader in the city. Our decade-long partnership with Boyd Gaming has been a great one, and Borgata’s talented employee base will complement and strengthen our more than 60,000-member worldwide MGM Resorts team. We are excited about the opportunity to bring our market-leading loyalty program, M life Rewards, to the resort and integrate our operations, to position Borgata for further growth.
While MGM did partially own the Borgata through Marina District Development Company, this will be its first fully-owned casino property in Atlantic City. Since acquiring Mirage Resorts in 2000 and Mandalay Resort Group 2004, MGM has been the dominant casino owner on the Las Vegas Strip. The casino properties it owns are (MGM also owns non-casino properties) Bellagio, Circus Circus, Excalibur
Luxor, Mandalay Bay, MGM Grand, The Mirage, Monte Carlo, and New York-New York. MGM Resorts also owns 50 percent of CityCenter in a joint venture with Dubai World, which means it owns half of the ARIA Resort & Casino, similar to the situation with the Borgata prior to this announced purchase.
Other casino properties in which MGM Resorts has at least a 50 percent stake include Beau Rivage Hotel and Casino in Biloxi, Mississippi, Gold Strike Casino Resort in Tunica, Mississippi, Grand Victoria in Elgin, Illinois, MGM Grand Detroit, MGM Macau, and MGM Grand Sanya in China.
MGM Resorts also has three properties under construction: MGM National Harbor in National Harbor, Maryland (planned opening 2016), MGM Cotai in Macau (2017), and MGM Springfield in Springfield, Massachusetts (2018).
Though the sale its stake in the Borgata marks Boyd Gaming’s exit from the Atlantic City gambling market, it has expanded its footprint in the Las Vegas “locals” casino market this year. In April, the company agreed to buy the Aliante Casino and Hotel in North Las Vegas for $380 million and Cannery Casino Resorts for $230 million.
Boyd Gaming is known for these types of casinos, generally the smaller, less glitzy properties that cater more to local gamblers than tourists (though that’s not to say that they are necessarily small, drab, or unattractive to tourists). Boyd owns the Fremont Hotel and Casino, Main Street Station, and the California Hotel and Casino in downtown Las Vegas. The Gold Coast, located across the street from the Rio where the 2016 World Series of Poker is being held, is a Boyd property, as are the Suncoast Hotel and Casino and my personal off-Strip destination for low-stakes blackjack and pai gow, the Orleans Hotel and Casino.
Boyd Gaming also owns a number of properties around the United States in Mississippi, Iowa, Indiana, Louisiana, Illinois, and Kansas.