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Kerkorian calls off plan to buy Las Vegas sites

His retreat from MGM Mirage properties comes as the casino operator unveils a joint venture on the Strip.

June 21, 2007|Martin Zimmerman | Times Staff Writer

Never mind.

Billionaire investor Kirk Kerkorian has abandoned his effort to buy two of MGM Mirage's premier Las Vegas developments, the Bellagio casino-resort and the $7-billion CityCenter development.

The announcement Wednesday by Kerkorian's Tracinda Corp. -- a Beverly Hills investment firm that owns 56% of MGM Mirage shares -- came as MGM Mirage unveiled plans for a multibillion-dollar casino-hotel on the Vegas Strip that would be built in a 50-50 joint venture with casino developer Kerzner International.

That deal "demonstrates that there is significant potential to unlock value for [MGM Mirage] shareholders through a variety of strategic transactions," Tracinda said in a statement.

Four weeks ago, Kerkorian's interest in the Las Vegas properties sent MGM Mirage stock up more than 27% in a single day and boosted the value of Tracinda's stake in the company by about $2.7 billion.

News that the 90-year-old investor was pulling back from the negotiating table pushed the shares down almost 7% to $80.60 -- above the closing price of $79.98 achieved after Tracinda signaled that it wanted to start talks with MGM Mirage.

Analysts said the company's stock was being buoyed in part by investors' belief that MGM Mirage might be ripe for a takeover.

"Mr. Kerkorian's withdrawal makes an acquisition by another private equity firm a real possibility," Justin Sebastiano, senior gaming analyst at Nollenberger Capital Partners Inc., wrote in a note to clients. "We could even see a bidding war ensue."

Sebastiano raised his target price on MGM Mirage to $91 a share from $76 and reiterated his "buy" rating on the stock.

Investors also were cheered by the implication that MGM Mirage intended to enter into joint ventures to realize the value of some of its excess land holdings in America's gaming capitals, said Dennis Forst, gaming analyst at KeyBanc Capital Markets.

The project with Kerzner is planned for a largely vacant 40-acre site owned by MGM Mirage at Las Vegas and Sahara boulevards on the north end of the Strip, across the street from the Sahara Hotel & Casino. MGM Mirage valued the land at $20 million an acre.

The company owns an additional 200 acres of land on the Strip that is either vacant or under-developed. Forst placed the value of those holdings at about $3 billion. The company also owns almost 90 acres of prime, undeveloped property in Atlantic City, N.J.

Kerzner, based in the Bahamas, is an international casino-resort developer and manager with a resort in the Bahamas and properties under construction in Dubai and Morocco.

Tracinda said in its statement that it would "continue to monitor its investment" but gave no further indication of its plans.

"Mr. Kerkorian is inscrutable," Forst said. "He has left every door open. He could come back with an offer for something. He could sell his whole stake. Or anything in between."

In the meantime, Forst said, "people still want to ride along with Kerkorian."


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