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Rod Smith

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MGM Mirage Expansion: Deal Struck for Resort in Macau

22 Jun 2004

By Rod Smith

LAS VEGAS and MACAU -- With the ink barely dry on its $7.9 billion proposal to buy Mandalay Resort Group, MGM Mirage on Monday entered into a joint venture agreement with Pansy Ho Chiu-king to develop, build and operate a hotel-casino resort in Macau.

"Macau is certainly part of our global expansion and growth strategy," said MGM Mirage spokesman Alan Feldman. "It also positions us in one of the key gaming markets anywhere in the world. Macau is big now and promises to be bigger, and we plan to be part of the reason for that growth."

MGM Mirage has made no secret of its interest in developing a hotel-casino in the former Portuguese colony off the coast of China.

It has been working to break into the market since 2002, when it lost out to Las Vegas developers Sheldon Adelson and Steve Wynn in bidding on a license concession to operate a casino in the Chinese enclave. In February, MGM Mirage confirmed it still had its sights on developing a new casino in Macau, but said reports of an imminent deal between Stanley Ho and the Las Vegas gaming giant were premature.

Feldman said at the time that the company had made no secret of its interest in Macau but confirmed it was involved in ongoing conversations with Stanley Ho's daughter, Pansy, concerning a possible casino development in Macau.

MGM Mirage Chairman Terry Lanni said in a statement Monday that his company has always said it would like to participate in Macau under the right circumstances.

Hal Rothman, chairman of the history department at the University of Nevada, Las Vegas, who has raised questions about the political stability of China, said the partnership with Ho's daughter insulates MGM Mirage compared with other Las Vegas operators that are moving into Macau.

Until Adelson opened his $240 million, 1-million-square-foot Sands Macau casino and entertainment complex in May, Stanley Ho had maintained a 40-year casino monopoly in Macau.

Wynn is planning to break ground later this month on a $705 million, 600-room hotel-casino.

The MGM Mirage development, set to open in 2006, will use the "MGM Grand" name and will be located on a waterfront site next to the planned Wynn Resorts hotel casino and near the Lisboa hotel-casino.

It will be built on the so-called Cotai Strip, where Adelson plans a $5 billion to $10 billion project that will turn a strip of reclaimed land into a huge resort complex of several hotels and casinos that will be patterned after the Las Vegas Strip.

The design and planning work is already under way for the MGM Mirage Macau project, half of which will be owned by each of the joint venture partners.

MGM Mirage declined to discuss details of the development, but Wall Street analysts estimated the hotel-casino will cost between $400 million and $500 million.

Deutsche Bank analyst Marc Falcone called the announcement "long anticipated," but said Macau represents a great opportunity for Las Vegas operators.

However, University of Nevada, Las Vegas professor and casino industry expert Bill Thompson said it "seems premature for (MGM Mirage) to be trying to flex its muscles overseas."

"They have a lot on their plate here. I hate to use the word 'greedy,' but they need to wrap up what they did (last week). This makes it look like they're on a feeding frenzy," he said.

The joint venture will operate in Macau as an independent entity under the terms of a subconcession. The agreement is subject to the approval of the government of Macau and other regulatory approvals, as well as the entry into a subconcession agreement with Sociedade de Jogos de Macau, the holder of the concession.

Pansy Ho is managing director of Shun Tak Holdings Ltd., a leading Hong Kong-based conglomerate operating four core businesses - shipping, property, hospitality and investments.

MGM Mirage closed Monday at $47.88, up 33 cents, or 0.69 percent, on normal trading volume.

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