'Wal-Mart Effect' Seen With Potential Casino Merger

LAS VEGAS -- As talks continue on a potential merger between MGM MIRAGE and Mandalay Resort Group, the potential fallout of such a blockbuster deal is being assessed by the companies' employees and suppliers.

One observer predicts a successful merger would result in a "Wal-Mart effect" -- that is a lot of people may complain about the massive size of the company but they will show up in huge numbers because they can't resist its deals. Suppliers, too, would likely clamor to do business with the mega-company.

MGM MIRAGE on Tuesday extended the expiration of its $68 per share offer for Mandalay to 5 p.m. Friday. The offer had been scheduled to expire at 5 p.m. Tuesday.

The stocks of both Las Vegas companies treaded water this morning as investors awaited word on the outcome of the talks and contemplated potential side deals that could see some of the potential combined company's casinos sold off to help pay for the $7.65 billion price for Mandalay and to resolve antitrust concerns.

MGM MIRAGE traded early today at $47.85, down 14 cents. Mandalay fell 65 cents to $69.05.

In the meantime, Luigi Mastropietro has some advice for the 74,000-plus employees who work nationwide for MGM MIRAGE and Mandalay Resort Group: Kick your productivity into high gear.

Mastropietro, a marketing expert for What's Up Consulting in Las Vegas and an officer with the Casino Management Association of Southern Nevada, should know. He has survived nine acquisitions in 18 years in a career that has taken him to credit reporting agency TRW and casino ATM provider Global Cash Access.

Among those waiting with some anxiety are the company's Las Vegas-area employees -- about 33,000 at MGM MIRAGE and about 25,000 at Mandalay -- some of whom will lose their jobs if a deal is consummated. MGM MIRAGE also has 5,800 employees outside of Clark County while Mandalay has about 10,500.

"Employees tend to panic," Mastropietro said. "They're not used to this kind of consolidation."

But Mastropietro said to some extent, the consolidation that would occur if MGM MIRAGE's bid is successful would be healthy for the industry. Middle managers sharpen their skills as they attempt to prove their worth when jobs are on the line and some buyouts clear paths to promotion in the eventual merged company.

Not every employee's job is on the line.

Culinary Union Local 226 Secretary-Treasurer D. Taylor said most of the rank-and-file workers his union represents would still have jobs regardless of whether the acquisition takes place.

"In service-based industries, I don't see that a consolidation like this will change much," Taylor said. "Whether the resorts are owned by MGM MIRAGE or Mandalay Resort Group, they still have to make beds and they still have to make the food."

Taylor said the union had no position on the acquisition and he had no predictions about whether it would be successful.

"If it goes through, we have succession clauses in our contracts so that an acquiring company would be obligated to honor our contracts," he said.

The Culinary represents about 22,000 workers between the two companies and both are under contract through May 2007.

The story is a little different for middle managers and junior executives who could find their departments consolidated as the merged companies eliminate duplication in areas like accounting, marketing and information technology.

Mastropietro said how consolidation would occur depends greatly on how MGM MIRAGE views the value of the assets it is acquiring. For example, he said hypothetically, the company could keep the entire convention sales staff of Mandalay even though MGM MIRAGE already has such a department because the company may want to improve its position in the convention niche when it picks up large new convention center.

"The advice I'd give to managers of those companies is to push for the highest possible level of productivity," Mastropietro said. "Give 150 percent. Take all the time off you have coming some other time."

The employees aren't the only ones who would be affected by a successful acquisition by MGM MIRAGE.

Casino industry observer Bill Thompson, chairman of the Department of Public Administration at the University of Nevada, Las Vegas, agrees with most observers who believe the Justice Department, Federal Trade Commission and state gaming regulators will take a close look at the deal for potential competitive issues and may require some casinos to be sold.

How would vendors and businesses be affected by an acquisition?

Mastropietro said it should be a wash.

He acknowledged that if the companies consolidated, there could be fewer properties to win contracts with.

"That's bad if your competitor has the contract," he said. "But it works the other way as well. If you have the contract with MGM MIRAGE, you'll suddenly have a lot more business."

He also said he believes customers would be the biggest beneficiaries of an MGM MIRAGE acquisition. That's because the company, which has shown a high degree of excellence in its service, would be able to spread that to all the new properties it would acquire.

"It's a very big plus for customers," Mastropietro said. "If I have a loyalty card that's good at 11 different properties, I now have even more choices if the acquisition goes forward."

He cited the "Wal-Mart effect," in which many critics complain about a massive company taking over the retail industry, yet customers flock to the store because they can't resist the deals they get.

Copyright © Las Vegas Sun. Inc. Republished with permission.