Thursday, March 24, 2005

Ilitch purchases MotorCity Casino

Businesswoman will pay $525 million to Mandalay for controlling interest.

By Joel J. Smith / The Detroit News

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DETROIT -- Mandalay Resort Group Inc. and Marian Ilitch made it official Wednesday -- the Detroit businesswoman is purchasing a controlling interest in the MotorCity Casino for $525 million.

Ilitch is purchasing a 53.5 percent interest in the MotorCity Casino from Mandalay. She already owns 25 percent of the casino and has signed agreements to buy the remaining 21.5 percent from other minority investors.

The Michigan Gaming Board is expected to consider the transfer of the casino license at its regular meeting April 12.

If approved, MotorCity Casino strengthens Marian Ilitch's already wide power base in Detroit. She and her husband, Michael, own Little Caesar Enterprises Inc. The Ilitch family also controls the Detroit Tigers and Detroit Red Wings sports franchises, and owns the Fox Theatre and numerous other downtown Detroit properties.

"MotorCity has been a great asset to downtown Detroit," Ilitch said Wednesday. "To create the kind of a vibrant city we all envision, we need to have exciting entertainment venues as part of the mix."

MGM Mirage agreed in June to acquire rival Mandalay Resort for $7.9 billion. But before the deal between the casino giants can be completed, Mandalay must sell its interest in MotorCity because Michigan law prohibits one entity from owning more than 10 percent of two Detroit casinos.

MGM Mirage owns Detroit's MGM Grand Casino, and Mandalay owns a majority stake in MotorCity.

The sale of MotorCity's casino license to Ilitch is being coordinated by MGM attorneys.

MGM Mirage said Wednesday that its deadline to close the Mandalay purchase has been extended from the end of this month to the second quarter of the year, possibly as late as the end of June, to allow new members of the Illinois Gaming Board time to review the deal.

The Illinois Gaming Board also must approve MGM's purchase of Mandalay's Grand Victoria, a riverboat casino in Elgin, Ill., before the merger can be completed. Approval could take up to several months because the state board lacked a quorum for eight months until Illinois' governor appointed three new members last week.

Analysts are concerned the Illinois Gaming Board has such a backlog of work that it won't be able to consider the MGM Mirage/Mandalay merger for weeks or months.

"Both companies have agreed to extend the deadline for the merger 90 days," said Alan Feldman, MGM Mirage's senior vice president of public relations. "It has nothing to do with Detroit. Everything has been signed in Detroit. We just have to present everything to the state gaming board, answer any questions and then we are done."

Dan Gustafson, executive director of the Michigan Gaming Control Board, said that a transfer to an existing casino license holder like Ilitch could be processed quickly by the board. It would require his staff checking out the financing for the purchase and making a recommendation to the five-member gaming board.

A Michigan gaming consultant said Ilitch would be a good fit as a Detroit casino owner.

"On the positive side, she is someone who knows the city and area," said Jacob L. Miklojcik, president of Lansing-based Michigan Consultants who does gaming work nationally. "When she says to local leaders she can do this or can't do that, there will be normal negotiations. There will be more trust. When you have a Vegas person talking, there is some skepticism."

Ilitch representatives told The Detroit News on March 15 that she had negotiated a deal to buy out the other minority owners of MotorCity. She's purchasing the 11.5 percent share owned by Atwater Entertainment Associates LLC, a group of 108 investors.

Ilitch also has a signed deal to buy the remaining 10 percent owned by Bloomfield Hills businessman Tom Celani. With the Mandalay purchase, Ilitch would own 100 percent of MotorCity.

You can reach Joel J. Smith at (313) 222-2556 or jsmith@ detnews.com.