Dubai World yesterday said it will continue to build its stake in US-based MGM Mirage, the world’s second largest entertainment and leisure company, until it reaches the 20 per cent mark, a senior executive said.
The conglomerate increased its stake in MGM to 6.5 per cent last week.
“Our intention is to increase our stake in MGM to 20 per cent eventually. Now it can take one, two or even 20 years but there is a strategy we are following to reach that mark,” Dubai World Chairman Sultan Ahmed bin Sulayem told Emirates Business in an interview.
Without divulging details of the strategy, Bin Sulayem said: “We will keep buying stakes in MGM whenever we feel there is an opportunity to do so.”
He did not elaborate whether the acquisition would be through the market or via issue of new shares.
Dubai World said on Friday it has bought an additional five million shares of MGM Mirage for $242 million (Dh888m) (or $84.80 per share), from billionaire investor Kirk Kerkorian’s charity – Lincy Foundation – according to a filing with the US Securities and Exchange Commission.
The holding company now owns 19.5 million shares of MGM, which owns the Bellagio and Luxor hotels in Nevada, United States. Kerkorian is the Chairman of Tracinda, which holds more than 51 per cent of MGM Mirage’s shares.
When asked what methods Dubai World would adopt in the future to increase its stake in MGM, Bin Sulayem said: “We will always have three choices for increasing our stake in MGM – buying from institutions, from markets or directly from the company. It is eventually up to our board which way to take and when. The board members decide the final path. “For now, I will say that MGM Mirage is good and a stable company and we are very comfortable with the company.”
The hotel operator had about 299.4 million shares outstanding as of September 30, according to the Securities and Exchange Commission filing.
The move comes four months after Dubai World and MGM Mirage entered an agreement in August to jointly develop MGM Mirage’s $2.7 billion CityCenter mega resort development on Las Vegas Strip, scheduled to open by 2009.
As part of that deal, Dubai World purchased 14.2 million shares from MGM, which included a 50 per cent stake in the CityCenter developement.
The purchases would have given Dubai World a 9.5 per cent stake in MGM but investors had turned down Dubai World’s offer at that time, as the offer price was well below what holders could get on the open market. The recent purchase, however, brings Dubai World closer to its goal of buying as much as 28.4 million shares.
MGM, Kerzner International Holdings and Istithmar Hotels had finalised joint venture agreements in September to develop the multi-billion-dollar Nevada resort.