The Wall Street Journal-20080117-MGM- Dubai World to Raise Joint Tender Offer
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MGM, Dubai World to Raise Joint Tender Offer
MGM Mirage and Dubai World said they will increase the size of their planned joint tender offer for MGM shares by 50% and set the price at the top of the previously indicated range.
The firms are now willing to buy as many as 15 million shares of the casino operator at $80 each through a Dutch auction. The companies said last week the auction's price range would be $75 to $80. MGM said Tuesday it will purchase as many as 8.5 million shares, while Dubai World will buy as many as 6.5 million.
The latest proposed price is less than the $84 a share Dubai World paid last year to acquire its initial 4.9% stake in MGM and the $84.80 a share it paid last month for an additional $424 million in MGM stock. The stake held by the holding company for the Persian Gulf state now stands at 6.7%.
Tracinda Corp., MGM's majority owner, with a 52% stake, won't tender any shares.
In a Dutch auction, shareholders submit an offer to sell their shares with the range set by the company. The purchase price is then determined by the firm based on the offers submitted.
Dubai World manages the government of Dubai's business projects, including the private-equity powerhouse Istithmar and a big investment portfolio. It said in a filing last month with the Securities and Exchange Commission detailing the $424 million stock purchase from Tracinda Chairman Kirk Kerkorian's Lincy Foundation that it had no current plans, proposals or agreements to acquire additional shares from significant stockholders.
Dubai World has an agreement that will keep it from acquiring more than a 20% stake in MGM.
MGM and Dubai World got into business together in August, when MGM's board approved a deal under which Dubai World would pay $2.7 billion to acquire a 50% stake in CityCenter, a 76-acre development in Las Vegas of upscale hotels, condos and retail slated to open by 2009.
The agreement also called for Dubai World to buy 14.2 million shares from MGM Mirage and an additional 14.2 million shares from public shareholders. But investors shunned Dubai World's offer, as the $84 offer price was well below what holders could get at that time on the open market.
MGM, Kerzner International Holdings Ltd. and Istithmar Hotels FZE finalized joint-venture agreements in September to develop a multibillion-dollar Las Vegas resort that now includes participation by Dubai's investment arm. Dubai World is Istithmar's parent.
Dubai World is getting into the gambling business without building casinos in Dubai, where gambling is illegal.
