Dubai’s investment arm was given permission to increase its ownership of MGM Mirage last week, but one of its executives said that won’t happen until market conditions warrant such a move.
The Nevada Gaming Commission found Dubai World a suitable business and joint venture partner for MGM Mirage. Last year, Dubai World invested roughly USD 6 billion to acquire 9.4 of MGM Mirage’s outstanding shares and a 50 interest in the USD 9.1 billion CityCenter development, which is now under construction.
Dubai World has an agreement with MGM Mirage to acquire up to 20 % of the company. The firm still needs approval from other jurisdictions where MGM Mirage operates before it can increase its stake.
Li Boon Yu, a Dubai World director and the business’s chief investment officer, said the goal was to obtain all the necessary regulatory approvals before making any additional investments in the casino operator. „Market conditions aside, we want to get past these regulatory steps,“ Yu said after the commission hearing. He told regulators that Dubai World views its investment with MGM Mirage as a long-term relationship.
Dubai World paid USD 80 a share for its stake in the casino operator, but has seen the stock price slip more than 80 . Shares of MGM Mirage closed last week at USD 8.79 on the New York Stock Exchange, down USD 1.41, or 13.82 .
Yu said Dubai World is hopeful market conditions will get better sometime in 2009.“We are in constant dialogue with our bankers and everybody seems to be preparing themselves for 2009,“ Yu said.
In testimony earlier this month in front of the Gaming Control Board, Dubai World executives said the entity had an asset base worth more than USD 100 billion and had revenues of almost USD 11 billion in 2007.
Gaming Commission Chairman Pete Bernhard said Dubai World sought suitability on its own and was not asked to apply. He said this type of investment is important for Nevada. „It shows the growing maturity of the market,“ Bernhard said.
Still, the Gaming Control Board asked that Dubai World Chairman Sultan Ahmed Bin Sulayem and Chief Financial Officer Maryam Sharaf file routine gaming license applications with the state. Dubai World’s corporate structure is governed by the emirate’s laws and regulations. It was unlikely, however, the agency would conduct a full-scale licensing investigation.
Incoming MGM Mirage Chairman and CEO Jim Murren told the commission Dubai World’s investment was an important step for the company as it battles through the challenging overall economy. Murren said Dubai World will participate in other investments with MGM Mirage, including projects in Nevada.
Dubai World had been a partner with MGM Mirage and Kerzner International Holdings in a planned development on the northern end of the Strip that was put on indefinite hold earlier this month.
„This new partnership is also an exceptional example of the expanding globalization of hospitality and real estate endeavors by MGM Mirage,“ Murren said. „We are moving into growth opportunities that do not rely solely on casinos as the financial engine.“ MGM Mirage is working with Dubai World on the MGM Grand Abu Dhabi, a nongaming resort that is part of a USD 5 billion project.
„Every investment is purely a commercial decision and we will look at other opportunities with MGM Mirage,“ Yu said.