Nevada OKs Dubai-Grand Deal
The Associated Press reported Friday that Nevada officials have approved a proposal to allow Dubai World to acquire a larger stake in MGM Grand Inc. Dubai World, the Dubai government’s investment arm, is seeking to increase its total holdings in MGM Grand from 9.4 percent to 20 percent.
MGM Grand is pursuing the deal to offset losses to its plummeting stock price, which has dropped more than 90 percent from a 52-week high last year of $93.19 to its current price of $8.79. Thursday alone, the company’s stock price dropped $1.41 from $10.20.
Jim Murren, the chief operating officer who will replace longtime MGM Grand CEO Terry Lanni on Dec. 1, says that the added investment will help the company weather the ongoing financial crisis. As analysts at the recent Global Gaming Conference noted, a veritable credit ice age and shifting consumer interest toward Internet casinos have many land-based operators like MGM Grand scrambling to find the capital needed to fund ongoing projects.
"We are in troubled times and this is a time, we believe, to face our challenges very quickly," Murren said. "We have a crisis of confidence in the consumer."
Yet approval from Nevada regulators is only the first step in garnering U.S. government support for the deal. Dubai World, which is already highly vested in MGM Grand’s $9.2 billion Las Vegas CityCenter project, must also seek an OK from local and federal authorities and must obtain a casino-operator license in order to share in CityCenter’s profits. Dubai World applied for the license in April.
Meanwhile, with American stock prices highly unstable, Dubai World is not committing to a precise timeline for the purchase.
“We have many plans to work with our friends,” Dubai World chief investment officer Lai Boon Yu said. “It is not a question of if. When depends on market conditions."
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