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Identity of MGM’s Borgata Stake Buyer Leaked

Posted on October 20th, 2010

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Over the past weeks, news about MGM Resorts, finally acquiring a buyer for its half ownership of the Borgata Hotel, Casino and Spa, has been floating around. When the news spread, MGM, one of the biggest gambling companies in the world, did not actually name the company that got the deal. Insiders of the casino industry had been speculating that the most likely entity to have contracted the deal with MGM on this matter would be one engaged in private equities. Before long, the identity of the buyer finally surfaced. Leonard Green & Partners is a firm specializing in buying out companies. Currently managing assets that total more or less $9 billion, Leonard Green has been speculated as one of the companies behind the Borgata deal. True enough, It has just been confirmed that the firm indeed made an offer to acquire the stake of MGM Resorts International in Borgata Hotel Casino & Spa located in troubled Atlantic City. It turns out that it was the company MGM referred to when it divulged an offer was made for its stake in Borgata.

Leonard Green, with the recent Borgata bid, would now have a stake in what is currently the most lucrative resort in Atlantic City. For the past months, the situation in Atlantic City and the state of New Jersey has also been undergoing a series of changes, with the state government looking for all possibilities to save the city from continuous decline. With Governor Chris Christie’s plan to establish a state agency in control of the entire city – from land use to revenue allotment—Leonard Green’s involvement may just be timely. There is, however, an obstacle standing in the way of Leonard Green. Boyd Gaming Corporation is the operator and owner of the other half of Borgata, the other half that MGM does not own. Boyd, owning half of the company, can still exercise its right to forward a counterbid that can match the one by Leonard Green. As of this week, Boyd expressed that it is still in the process of weighing its options. Appeals for comment via phone and e-mail were left unanswered by spokespersons of Boyd Gaming Corporation. The two other parties involved, Leonard Green and MGM also did not give comments on the issue which spokespersons for both companies staying silent.

Other than its reported interest in Borgata, Leonard Green holds stakes in companies like Equinox, Sports Authority and Whole Foods Market Inc, among 49 others. As of the moment, the company does not have any gambling interests. The firm was established in 1989 and is investing in Equity Investors V, L.P., a private equity fund worth $5.3 billion and the company’s 5th fund. Aside from Borggata, Leonard Green has also taken interest in other gambling properties. The company recently lost the bidding for a Las Vegas property, the M Resort Spa Casino, to Penn National Gaming Inc.

MGM, which is currently the Las Vegas Strip’s largest casino operator, has decided to forego all of its stakes in Atlantic City, as it plans to focus more on its current joint venture in Macau with Pansy Ho, daughter of casino mogul Stanley Ho. Macau has overtaken Las Vegas as the world’s biggest casino market. Moreover, MGM made an arrangement with the New Jersey Division of Gaming Enforcement to give up its Borgota stake as the latter did not approve of Ho as a partner of a company having stakes in a business in New Jersey. Borgata, aside from the casino, also has the Water Club hotel tower valued at $400 million. According to the New Jersey Casino Control Commission, Borgata had the highest gross operating profit among the 11 casino resorts of Atlantic City for the year 2009, as well as the first six months of 2010.