By David Bodamer, Senior Associate Editor
In rapid succession, two mega mergers shifted the landscape in the U.S. casino industry. First, in mid-June, MGM Mirage announced plans to merge with Mandalay Resort Group in a $7.9 billion deal. Less than a month later, Harrah’s Entertainment Inc. trumped MGM’s move by signing a definitive merger agreement with Caesars Entertainment Inc. for $9.4 billion.
Although neither deal has closed, they will undoubtedly shift the American gaming landscape once approved. Harrah’s will retain its position as the industry’s largest player, a designation the MGM deal threatened. But, the companies, which already had flagship casinos facing each other on the Las Vegas Strip, will now compete toe-to-toe for supremacy in the lucrative market. MGM will reign supreme in Vegas, where it will control nearly half the slots and gaming space. Harrah’s, meanwhile, will rule Atlantic City, N.J., and have a more diverse portfolio nationwide.
Patricia Wright, an analyst with Fitch Ratings, believes the two combined will lord over Las Vegas. But Fitch and other analysts do have concerns about the deals. They suspect the MGM Mirage-Mandalay merger could have gained Federal Trade Commission approval with little problem if it had been the lone deal. But now that there are two blockbusters in the works, the agency might stop them both in order to prevent too much consolidation.
If the Mandalay deal closes, MGM Mirage will own and operate 28 properties, 23 of which will be in Nevada. Meanwhile, after the Harrah’s merger, the company will operate 56 properties throughout the country.
While MGM and Harrah’s are by far the largest players, they are not the only companies that have consolidated. Earlier this year, in another merger in the billions, Boyd Gaming Corp. agreed to merge with Coast Casinos Inc. to create an operation with more than $2 billion in annual revenues. Harrah’s and MGM might own the highest-tier properties, but Boyd and Coast operate off the strip with 17 assets. As a result, the two companies had been rumored to be targeted for takeover by the industry’s larger players, which some speculate prompted MGM and Harrah’s to pursue their eventual deals.
“There had been talk for quite a while that both could be a takeover (target). Merging together was a real smart move for them,” said David Atwell, president of Resort Properties of America, a Las Vegas-based hotel and casino broker.