In this week's installment of Inside Gaming, a big acquisition was announced this week as MGM Resorts International acquires the Borgata, and a six-year long legal battle between the Las Vegas Sands and its ex-Sands China CEO finally ends with a big cash settlement.
MGM Resorts Acquires Borgata, To Expand East Coast Footprint
There was big industry news this week with the announcement that MGM Resorts International has acquired the Borgata Hotel Casino & Spa.
As Forbes reports, the price tag for the acquisition totaled $900 million to be paid to Boyd Gaming Corp. who owns 50% of the Borgata. Minus the payment of current debts, Boyd "estimates that it will gain $600 million by way of the transaction."
Once the deal is complete, MGM Resorts International will be selling the Borgata to MGM Growth Properties for a reported $1.175 billion, with the latter then planning to lease the Borgata to MGM Resorts for $100 million annually.
Boyd Gaming CEO Kevin Smith told Forbes that while the company have been "pleased with the performance" of the Borgata, "this transaction is an attractive opportunity to immediately unlock significant value for our shareholders."
The move comes less than two months after Boyd Gaming acquired the Aliante Casino and Hotel in North Las Vegas for $380 million. At the time there was much speculation regarding Boyd's intention also to acquire another Las Vegas property, Cannery Casino Resorts LLC, and indeed that purchase was made as well shortly afterwards for $230 million.
As Forbes explains, MGM Resorts, currently the largest operator on the Las Vegas strip, now also owns the best performing casino on the Atlantic City boardwalk. The deal also has significance in the online realm, giving MGM a chance to take advantage of Borgata's license to operate online in New Jersey.
Connections are also being made between the timing of this deal and the recent bailout of Atlantic City by New Jersey lawmakers. Last week in this space we discussed how legislators had voted in favor of a rescue bill with Governor Chris Christie's signature needed for it to take effect. Christie did sign, thereby granting the city temporary loans to avoid facing default.
Bloomberg characterizes the deal as "a big bet by MGM on the future of Atlantic City," noting how the city's gaming revenue has fallen by in half since 2006. However, speaking to Bloomberg, MGM Resorts Chief Executive Officer Jim Murren was sanguine regarding the Borgata adding to the company's growing presence on the east coast.
"We viewed Borgata as what it is, a high-quality, high-performing property that's bucked the trend in a very rough market," said Murren.
For more on the deal and its implications for MGM, Boyd, and the Borgata going forward, head over to Forbes.
Las Vegas Sands Settles With Fired Sands China CEO for More Than $75M
Almost six years' worth of lawsuits between the Las Vegas Sands Corp. and the former chief executive officer of Sands China Ltd. came to a conclusion this week when the company agreed on a settlement requiring them to pay "between $75 million and $100 million" to Steve Jacobs in order to resolve all legal claims against the company, reports The Wall Street Journal.
Jacobs first filed a lawsuit for wrongful termination after being fired as CEO of the Sands China Unit in 2010. The exact terms of the settlement were confidential; however, a "person familiar with the matter" shared the $75M-$100M range with the WSJ.
In his lawsuits, Jacobs claimed Las Vegas Sands president and CEO and Sands China chairman Sheldon Adelson had ordered him to pressure Macau government authorities improperly as well as to extort other officials, and that his firing resulted from his refusal to comply with such orders. Edward Tracy succeeded Jacobs as Sands China CEO and served for four-and-a-half years before retiring in early 2015, at which point Adelson himself moved into the position.
As the WSJ explains, the lawsuits prompted investigations by both the Securities and Exchange Commission and the U.S. Department of Justice to see if the company "had violated the Foreign Corrupt Practices Act, which bars U.S. companies from bribing officials of foreign governments."
In April of this year, the Sands paid more than $9 million as a civil settlement to end that probe. Then last month the Sands paid another $2 million fine levied by the Nevada Gaming Control Board following allegations the company had violated state gaming law, a finding in part resulting from federal-level allegations of accounting violations in China (as well as anti-money-laundering practices in Las Vegas).
It was just about a year ago we were sharing the latest regarding the wrongful termination case and how it had led to allegations regarding ties between the Sands and "high-ranking members of Chinese triads" or organized crime.
At the time the British newspaper The Guardian along with a nonprofit watchdog group called the Campaign for Accountability had filed motions to have records in the case be unsealed, in particular asking for reports compiled by a Hong Kong-based investigator concerning the alleged organized crime ties. However District Judge Elizabeth Gonzalez ruled in July 2015 the reports would not be unsealed because they contained sensitive commercial and gaming information.
In a 2012 interview with the WSJ Adelson said "he wished he had settled Mr. Jacobs's suit early on but couldn't give in to what he believed were improper accusations."
For more on the settlement, visit the WSJ.