MGM and Mandalay, Vendors await decisions from merging companies

02.07.2004, Lesen Sie hier den Bericht über «MGM and Mandalay, Vendors await decisions from merging companies».

The $7.9 billion merger between MGM MIRAGE and Mandalay Resort Group may be off the front page but is still the biggest buzz in town. Since the deal was reached, Wall Street analysts and other financial experts have stepped up to slice and dice gambling and hotel revenue for the individual companies and the combined entity.

There's a lot more to the gaming business than filling rooms and casino pits, especially now that at least half of MGM MIRAGE's revenue and more than 60 percent of Mandalay's revenue coming from non-gambling sources. The megadeal has the potential to affect every corner of each hotel involved, from the entertainment offered in showrooms, nightclubs and lounges to boxing events, concerts, retail and restaurants. How the merger would affect contracts with advertising agencies and public relations firms also remains to be seen. Several vendors say MGM MIRAGE and Mandalay officials so far haven't discussed how the deal could affect their contracts. But there's some indication that the companies will be careful about maintaining the status quo.

In a 38-page merger agreement filed last week, the companies said they would use "reasonable best efforts" to obtain necessary waivers, consents or third-party approvals required to "preserve material contractual relationships" at MGM MIRAGE, Mandalay and their subsidiaries.

While the deal is pending, the companies said they would "use all reasonable efforts" to keep their officers and key employees as well as "preserve the goodwill and business relationships with customers and others having business relationships with them." Some firms that work with MGM MIRAGE say the acquisition will make the companies stronger and better able to withstand competition in Las Vegas and beyond. And firms that work with Mandalay say they welcome the competition from MGM MIRAGE vendors and don't expect major changes to their contracts.

Ultimately, experts say, contracts with entertainment venues as well as leases with restaurants and retailers will depend on how the combined entity would be structured. When MGM Grand Inc. merged with Mirage Resorts Inc. in 2000, the combined company was organized operationally, with all MGM resorts under one subsidiary and Mirage resorts under another. Executives at each subsidiary retained significant decision-making power. The new company might break with tradition and combine like properties together that cater to specific customer groups, such as lower-end and higher-end, under separate corporate banners, observers say.

If MGM MIRAGE and Mandalay consolidate the companies at the corporate level, Mandalay vendors might have more to fear, experts say. But if Mandalay properties are kept separate, individual contracts may remain safe, they say. One of the most obvious combinations would involve the Strip's two largest entertainment venues -- the MGM Grand Garden arena and Mandalay Bay Events Center.

For boxing promoters, the merger of the city's two top boxing venues under one company could have significant consequences. "It's never good to only have one buyer of anything," said Dan Goosen of Los Angeles-based Goosen Tutor Promotions, one of the country's largest boxing promoters. "On the other hand, both properties have arenas that they need to fill. I think they're going to be looked at as two different entities that have separate needs," he said. The situation might be different if the two companies only operated boxing events from ballrooms and not major venues, he said.

Boxing will remain a staple of Las Vegas entertainment, Goosen added. "Boxing and casinos have been a marriage made in heaven. They have been beneficial to each other and I don't see anything but continued growth that way." Mandalay Bay has rapidly distinguished itself on the world stage in part because of high-profile boxing events and will likely continue to flourish in that arena, he said. Those who promote the companies' resorts say they don't expect any major changes. "Change is inevitable and it's going to help some and hurt others," said Jerry Kramer, managing partner of Schadler Kramer Group Advertising in Las Vegas, which handles accounts for MGM MIRAGE. "But (consolidation) doesn't really work in creative services. To do more work you're going to have to hire more people. Each of the properties still have the same needs beforehand and the same individual identities that they had beforehand."

Michael Mayes, president of DRGM Advertising in Las Vegas, said it's "too early to tell" how the merger might shake out for advertising and public relations firms. "I don't think we see it as a risk of losing (accounts) at this point," said Mayes, whose company handles accounts for Mandalay Resort Group. "It's going to be some time coming and there's a lot of work to be done" in the meantime, he said. "We're not sitting here on pins and needles at this point." "Obviously there will be changes," Mayes said. "It's a large transaction. But we don't know what their needs are going to be (when the deal closes) and we don't have a crystal ball." Individual properties still need to maintain their brands and their customer niche, however, he said.

Andrew Sasson, developer of several MGM MIRAGE nightclubs including Light at Bellagio and Mist at Treasure Island, said the merger could expand his potential customer base and even create an opportunity to expand into Mandalay properties. "For me it's wonderful," said Sasson, who recently opened the restaurant FIX in Bellagio. "It's a bigger pool to drive business from. And they can take the best from what's (at MGM MIRAGE) and raise the bar elsewhere."

If past experience is any indication, MGM MIRAGE isn't likely to make wholesale changes to Mandalay properties and will also encourage competition between resorts, however, he said. "They like the back-and-forth competition between MGM and Mirage (resorts)," Sasson said. Competition makes the product better, he said. "Everyone's going for the big cheese. They're just as tough on each other as they are with the resort across the road. That's how you improve and move up." Beyond this merger, competition continues to intensify in Las Vegas as the town grows and matures, Kramer said. "There's more business and more business means more competition. It means you have to be better at what you do," he said.

A new gaming titan on the Strip is just fine with George Maloof, the owner of the Palms resort and an operator known for distinguishing his Flamingo Road property as an entertainment hotspot for the young and hip. "I think we have already developed a certain market niche with our local clientele and Las Vegas visitor," Maloof said. "I've been around this town for a long time and I think that as long as the city keeps marketing itself as a destination, that's the most important thing, whether they stay at the Palms or Mandalay Bay."

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Über MGM Resorts International Operations, Inc.:

MGM Resorts International (NYSE: MGM) ist ein globales Unterhaltungsunternehmen des S&P 500 mit nationalen und internationalen Standorten, das erstklassige Hotels und Casinos, hochmoderne Tagungs- und Konferenzräume, unglaubliche Live- und Theaterunterhaltungserlebnisse bietet und eine umfangreiche Auswahl an Restaurants, Nachtleben und Einzelhandelsangeboten.

Das MGM Resorts-Portfolio umfasst 29 einzigartige Hotel- und Destination-Gaming- Angebote, darunter einige der bekanntesten Resort-Marken der Branche.

Wir betreiben ein Portfolio von Resorts in Las Vegas, darunter Bellagio, MGM Grand, Mandalay Bay und The Mirage, The Signature, Excalibur, Luxor, New York-New York, Park MGM und weitere. In Las Vegas haben wir auch eine bedeutende Beteiligung an CityCenter, dem legendären Hotel, Kongress-, Einzelhandels- und Restaurantkomplex im Herzen des Las Vegas Strip mit ARIA Resort und Casino und Vdara Hotel und Spa, Crystals Retail und Veer Eigentumswohnungen.

Das Unternehmen expandierte in den USA und auf der ganzen Welt und erwarb kürzlich den Betrieb des Empire City Casino in New York und des Hard Rock Rocksino in Ohio, das in MGM Northfield Park umbenannt wurde.

Im Jahr 2018 eröffneten MGM Resorts MGM Springfield in Massachusetts, MGM COTAI in Macau und das erste Hotel der Marke Bellagio in Shanghai.

Die über 80.000 Mitarbeiter von MGM Resorts weltweit sind stolz darauf, dass ihr Unternehmen als eines der weltweit am meisten bewunderten Unternehmen des FORTUNE Magazine anerkannt wurde.

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