The offer price represents a 7%-14% premium to the $69.98 closing price of MGM Mirage on January 8. Price discovery will be through a Dutch auction within the specified $75-$80 price range. This means shareholders will be able to stipulate the price at which they will tender shares; the price finally offered to all shareholders will be the lowest per share price at which the entire 10 million shares are covered.
In case more than 10 million shares are tendered, shareholders holding less than 100 shares will be bought out in their entirety and other shares will be purchased on a pro rata basis. The offer is not subject to any minimum number of shares being offered, so any shares tendered up to the 10 million ceiling will be purchased.
MGM Mirage and Dubai World will each purchase 50% of the tendered shares for a total outlay between $750 million-$800 million depending on the price and the number of shares tendered. Dubai World will acquire shares through its investment vehicle, Infinity World. MGM Mirage has 293.8 million shares outstanding.
MGM Mirage is a development company which is 52% owned by Kirk KerkorianÆs Tracinda Corporation. Tracinda will not be tendering any shares.
MGM Mirage is in the gaming, hospitality and entertainment businesses. It operates 17 properties located in Nevada, Mississippi and Michigan, and has investments in four other properties in Nevada, New Jersey, Illinois and Macau. It is developing casino and non-casino resorts on its own and with partners in Las Vegas, Atlantic City, the People's Republic of China and Abu Dhabi.
Dubai World is a major investment holding company which has interests in a portfolio of businesses including DP World, Istithmar, Kerzner, One & Only, Atlantis and Barney's. Dubai World is also a leading real estate developer and port operator.
In August, Dubai World agreed to pay around $3 billion for 50% ownership in MGM Mirage subsidiary, Mirage Resorts CityCenter project. Credit Suisse represented Dubai World and UBS represented MGM Mirage on the deal. CityCenter is a mixed-use luxury residential, resort and retail complex on the Las Vegas strip which is scheduled to open in 2009.
At the time, Sultan Ahmed Bin Sulayem, chairman of Dubai World had termed CityCenter the most ambitious real estate project ever undertaken in Las Vegas saying: ôTogether, our companies have the ability to change the face of luxury living, both in Las Vegas and beyond."
As part of the CityCenter deal, Dubai World acquired a 5% stake in MGM Mirage for $1.2 billion.
Subsequent to this in December, Dubai World spent $424 million to buy five million shares of MGM Mirage from Kirk KerkorianÆs charity, The Lincy Foundation at a price of $84.80 per share. Post-purchase Dubai World increased its shareholding in MGM Mirage to 6.5% and negotiated the right to nominate one director to the board of MGM Mirage with the proviso that should Dubai World increase its stake beyond 12%, the firm will be entitled to board representation proportionate to its stake.
Dubai World has agreed not to increase its stake in MGM Mirage above 20%.
Middle Eastern investors are using their abundant petrodollars to make large investments in businesses perceived as having a healthy future cash flow, in anticipation of a future when oil reserves start depleting. The emirate of Dubai specifically has been aggressively targeting opportunities across regions.
MGM Mirage gained 5.44% on the NYSE on Thursday to close at $73.79.
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