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Leonard Green & Partners Bids for MGM's 50%
Stake in Borgata Hotel Casino & Spa

By Suzette Parmley, The Philadelphia InquirerMcClatchy-Tribune Regional News

Nov. 03, 2010--ATLANTIC CITY -- The posh Borgata Hotel Casino & Spa, credited with altering the skyline here, is close to getting a new half-owner.

Leonard Green & Partners L.P., a Los Angeles buyout firm with a footprint in the consumer and retail world (Neiman Marcus, Sports Authority, Rite Aid), has offered to buy MGM Resorts International's 50 percent stake in the Borgata, people with knowledge of the negotiations confirmed.

On Tuesday, MGM said it was moving forward on divesting its only property in Atlantic City.

"We have begun with the bidder process of negotiating final documents, going through due diligence, and obtaining regulatory approval," said MGM Resorts spokesman Alan Feldman.

Las Vegas-based MGM Resorts will give a formal update on the bidding process Wednesday, during the company's third-quarter earnings call, Feldman said.

Calls to Leonard Green & Partners in Los Angeles were not immediately returned.

If the transaction is finalized and approved, MGM Resorts expects to receive about $250 million for its equity stake, $114 million from the Borgata debt financing, and $71 million from previous land sales. The funds would come as the company is trying to raise cash to pay off debt while awaiting a Las Vegas recovery. It plans an IPO of its Macau casino, MGM Grand Macau, on the Hong Kong Stock Exchange.

MGM Resorts is the largest casino operator on the Vegas Strip, where the soft economy, record foreclosures, and lower discretionary spending have severely affected gambling revenue.

For Leonard Green & Partners, the deal would provide a stake in Atlantic City's most profitable casino.

"They are a long-term private-equity investor who is now looking at gaming," said analyst John Kempf, of RBC Capital Markets in New York.

The sale comes at a time when Atlantic City -- the second-largest gaming market in the country -- is struggling mightily against new gambling competition from Pennsylvania. All new development here, including the $2 billion Revel project on the Boardwalk, has stalled amid double-digit revenue decline at the existing casinos.

New Jersey lawmakers are scrambling for ways to stem the tide. In July, Gov. Christie proposed a state takeover of the city's casino and tourism district, to boost its marketing budget and increase convention business by a third.

The Borgata remains the Shore's top brand and market leader, despite revenue decline in recent months. In September, it generated about $53 million, down 16.1 percent from a year ago. (October revenue figures come out next week.)

Boyd Gaming Corp., the Borgata's operator and half-owner, had the right to match Leonard Green's bid. But in an earnings call last week, the firm said it would not exercise its right of first refusal and match the offer.

Since 2008, MGM's overseas partnership with Pansy Ho, daughter of Macau gambling titan Stanley Ho, has been the subject of an investigation by the New Jersey Division of Gaming Enforcement.

In May 2009, the agency recommended to the state Casino Control Commission that MGM's joint-venture partnership with Pansy Ho be considered "unsuitable" because of Stanley Ho's alleged ties to organized crime.

In February, MGM agreed to place its stake in the Borgata and related leased land in Atlantic City in a divestiture trust. The five-member commission green-lighted the divestiture process in March.

Gaming analysts say stabilizing the Borgata's ownership will be good for the Shore resort. In many ways, the Las Vegas-style megacasino -- with its upscale retail shops, high-style rooms, A-list entertainment, and Borgata Babes cocktail waitresses -- has come to define Atlantic City and where it wants to go.

"The Borgata is critical to Atlantic City's long-term success. It is still Atlantic City's newest and highest-grossing casino," said analyst Jacob Oberman, based in CB Richard Ellis' Las Vegas office. "As such, it helps attract a wealthier and younger demographic to the destination."

Its $1.4 billion golden hue is hard to miss. The Borgata glistens in the sun; at night, purple lights outline its sleek, vertical form.

"There's an ambience as soon as you walk through the door. There's definitely a vibe," Robert Lunk, 32, of Mount Laurel, said as he headed to his room Monday to prepare for an evening at MurMur, one of Borgata's nightclubs.

"This is what a casino is supposed to look like -- lots of energy, action, and pretty girls all around," Lunk said. "This is why I keep coming back to Atlantic City."

Contact staff writer Suzette Parmley at 215-854-2594 or


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