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Foxwoods, MGM Grand to join in casino ventures
By Bruce Mohl, Globe Staff | April 26, 2006

http://www.boston.com/business/articles/2006/04/26/foxwoods_mgm_grand_to_join_in_casino_ventures/

Two of the biggest names in the casino business -- Foxwoods and MGM Grand -- joined forces yesterday to develop gambling ventures around the globe and market a $700 million hotel-casino complex under construction in Connecticut.

Sign up for: Globe Headlines e-mail | Breaking News Alerts The deal gives Las Vegas's MGM Grand access to the Northeast market and Indian gaming, and provides an experienced partner for the Mashantucket Pequot tribe as it tries to diversify its operations in the face of rising competition here in New England.

Under terms released yesterday, the Pequots will license the MGM Grand name for the new resort the tribe is building adjacent to its existing facility in Connecticut. The complex, expected to feature a hotel, casino, 5,000-seat concert theater, spa, and nightclubs, is expected to open in 2008 and be operated by the tribe.

MGM Grand and Foxwoods also said they expect to jointly develop gaming and nongaming operations and share data for marketing purposes on the millions of gamblers who visit their respective properties. MGM Grand said it would provide a loan of up to $200 million to finance the gambling projects.

Richard McGowan, associate professor at the Carroll School of Management at Boston College, said the deal is a reflection of the rapidly consolidating gambling business.

''It's exactly like the airlines forming alliances. You've got to build alliances to get customers to come to your casinos," McGowan said.

McGowan said Foxwoods already faces intense competition from the Mohegan Sun casino in Connecticut and may face a powerful new rival if Harrah's, the nation's leading casino operator, succeeds in winning approval for a casino it is trying to build in Rhode Island with the Narragansett Indian Tribe.

The Massachusetts House earlier this month rejected a bill to allow 2,000 slot machines at the state's dog and horse tracks.

McGowan said MGM Grand, the number two casino operator in the United States, traditionally has built and operated its own properties, but is starting to realize that it needs to partner with other players if it is to bring new gamblers to its casinos.

MGM Grand operates 23 casinos in Nevada, Mississippi, and Michigan, and has investments in three properties in Nevada, New Jersey, and Illinois. Its casinos include the Bellagio, the MGM Grand, and the Mirage in Las Vegas.

William Sherlock, chief executive at Foxwoods, said MGM Grand and Foxwoods would both have a first right of refusal to partner 50-50 on any development project moving forward.

Sherlock said the development arm of Foxwoods currently has an agreement in principle to demolish a casino operated by an Indian tribe in California and build a new facility. He said MGM Grand would be invited to participate in that venture.

MGM Grand in its annual report has said Indian casinos in California have had a negative impact on the company's casinos in Reno and Laughlin, Nev.

Foxwoods is also applying for a license to operate slot machines in the Philadelphia area and has a preliminary agreement to launch a non-Indian gambling operation somewhere in the southern United States, Sherlock said. The Mashantucket Pequot tribe also owns land in the US Virgin Islands that could possibly be developed for gambling, he said.

Sherlock said the Pequot tribe was looking to partner with a private casino operator to help expand its nongambling revenues. He said MGM Grand's expertise in booking entertainers and conventions should be especially useful as Foxwoods expands to cater to those markets.

Currently, Foxwoods generates 78 percent of its revenue from gambling and 22 percent from other activities, Sherlock said. He said the tribe would like to move toward a more balanced split between its operations.

''They don't want to put all their eggs in one casino in one location," said BC's McGowan.

Mitchell G. Etess, the chief executive of Mohegan Sun, declined to comment on his competitor's moves. ''Certainly this is an interesting development, and it pays tribute to the strength of this gaming market," he said.

The Associated Press reported that Connecticut officials have asked the Pequot tribe for more information on the deal with MGM Grand.

The state's gaming compact with the tribe requires the state to sign off on any casino expansion, Attorney General Richard Blumenthal said.

''The nature of their business relationship is a mystery," Blumenthal said. ''They have given us no details nor have they given details to any state agency, including the Department of Revenue Services."