MGM Mirage Chooses Macao Over New Jersey
My post on BNET last week talked about how MGM Mirage wouldn't desert Pansy Ho and its Macao casino to keep the Borgata Hotel Casino & Spa in Atlantic City. It turns out I may have been correct, since MGM is looking into putting its 50 percent share in the Borgata into a divestiture trust.
By divesting, MGM hopes to later sell its stake in the casino and still be a partner with Ho in its MGM Grand Macau. Ho was called "unsuitable" by New Jersey gaming officials in federal regulatory filings. Last May, the New Jersey Division of Gaming Enforcement told MGM Mirage to either break up with its Macao joint venture partner or give up the most profitable casino in Atlantic City. If the Casino Control Commission agrees with the DGE, it could order MGM to sever their relationship. (Ho is considered unsuitable because her casino mogul father, Stanley Ho, has repeatedly been rumored to have ties to Chinese organized crime -- although he has never been arrested for or convicted of any wrongdoing.)
By severing ties to Ho, MGM would also lose its possibility of a $1 billion IPO in Hong Kong, something that seems unlikely. The likelihood is that MGM will sell off its share in Borgata and concentrate on its Asian ventures.
"It's a pretty simple analysis. MGM Mirage is choosing its Macau joint venture over its Atlantic City joint venture," said JP Morgan gaming analyst Joe Greff in a research note.
Atlantic City's fortunes don't appear to be getting better. Pinnacle Entertainment announced late last week that it would be abandoning its plans for a $1.5 billion casino and instead will sell off the 14-acre parcel of land. Pinnacle, which bought the old Sands Casino Hotel for $270 million in 2006, imploded the building but reported a loss of $160 million on the property in late 2009.
"Atlantic City is no longer a good strategic fit for us, given the current economic outlook, the state of the financing markets and the major capital commitment that would be required," Pinnacle spokeswoman Pauline Yoshihashi told the Press of Atlantic City.
For some reason, New Jersey is taking a hard line against MGM Mirage's partnership with Pansy Ho, who was already cleared by Nevada state regulators in 2007. I think what's good enough for Las Vegas should be good enough for Atlantic City, especially when it's in danger of losing business with an established casino operator.