Thursday, June 02, 2016 10:52:28 AM
http://www.forbes.com/sites/darrenheitner/2016/06/01/mgm-buys-boyd-gamings-share-of-borgata-for-900-million/
MGM Resorts MGM +1.45% International and MGM Growth Properties LLC have acquired the Borgata Hotel Casino & Spa in exchange for consideration in the amount of $900 million to current 50% owner Boyd Gaming Corp. After debt payments are made, Boyd Gaming estimates that it will gain $600 million by way of the transaction.
Upon transfer of Boyd Gaming’s 50% share, MGM Resorts will then sell Borgata to MGM Growth Properties, a real estate investment trust, for approximately $1.175 billion. MGM Growth Properties plans to lease Borgata to MGM Resorts for $100 million per year.
“While we are pleased with the performance of [Borgata], this transaction is an attractive opportunity to immediately unlock significant value for our shareholders,” said Boyd Gaming CEO Keith Smith.
Borgata may come off the books for Boyd Gaming, but the company has been very active purchasing properties in 2016. In April, Boyd Gaming announced the acquisition of Aliante Casino Hotel & Spa in North Las Vegas and followed it up with the purchase of the Las Vegas assets of Cannery Casino Resorts LLC at a price of $230 million.
The deal is notable for MGM for many reasons. First of all, it allows MGM Resorts International, the largest casino operator based on the Las Vegas strip, to entirely own and control Atlantic City’s best performing casino. Second of all, it presents an opportunity for MGM to expand an online gambling presence with Borgata Hotel Casino & Spa already possessing a license to conduct Internet gaming operations in New Jersey. Finally, it may signal MGM’s shift to a focus on developing Internet gambling beyond poker as it sees the market shifting with more states like Pennsylvania potentially legalizing online gambling in the future. Borgata is the online casino market leader in New Jersey, per Grizzly Gambling. The just released June 2016 Las Vegas Advisor confirmed that Borgata remained the leading online casino revenue generator in New Jersey in April with $4 million received.?
The timing of the deal is also noteworthy. Last week, New Jersey Governor Chris Christie signed into law a proposal to bailout Atlantic City if the city does not fix its finances within five months. Atlantic City will receive $75 million in loans in the meantime.
Additionally, MGM Resorts is currently focusing on expansion within the East Coast. It has plans to open a casino this year in National Harbor Maryland as well as a casino in Springfield, Massachusetts in the future.
MGM’s deal to purchase Boyd Gaming’s interest in Borgata ends a partnership between the companies that helped generate $812 million in net revenue for the twelve months ended March 31.
“We expect MGM Resorts to remain net leverage-neutral, as we fully consolidate Borgata’s cash flows into the MGM Resorts portfolio,” said Dan D’Arrigo, Executive Vice President and CFO of MGM Resorts International. “Looking ahead, we believe the impact of the transactions remain consistent with our focus on further deleveraging the balance sheet.”
The transactions are expected to close in the third quarter of this year and are subject to regulatory approvals as well as other closing conditions
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