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Dubai to invest $5 billion in MGM Mirage

Announcing the signing of definitive agreements between the two companies, Dubai World said it would invest $2.7 billion in CityCenter — a luxury urban metropolis being developed in Las Vegas — and up to $2.4 billion for purchases of MGM Mirage common stock.

Under the agreement, the two companies will enter into a 50/50 joint venture in the landmark CityCenter hotels and condominiums development while Dubai World will acquire 9.5 per cent stake or up to 28.4 million shares in MGM Mirage. MGM Mirage shares rose $2.17, or 3 per cent, to $74.32 on Tuesday. The stock has more than tripled in value over the past year, giving the company a market value of $21.1 billion.

MGM, which is majority-owned by billionaire Kirk Kerkorian, owns the Mirage, Luxor and Bellagio among its properties on the Las Vegas Strip.

The MGM deal is being made through Infinity World Development, a wholly-owned subsidiary of Dubai World.

The joint venture, CityCenter Holdings LLC, will be owned equally by MGM Mirage and Infinity World Development Corp. Upon closing, CityCenter Holdings LLC will own 100 per cent of CityCenter, a mixed-use luxury residential, resort and retail complex.

Dubai World will purchase the share through Infinity World Investments through a combination of public tender offer for 14.2 million shares of the outstanding stock at a price of $84 per share, which represents an approximately 13 per cent premium over Tuesday's closing price, and an agreement to subsequently purchase an additional 14.2 million shares directly from the company at the same price, for a combined investment of approximately $2.4 billion.

Sultan bin Sulayem, Chairman of Dubai World said the two companies, known for creating landmark developments, have the ability to change the face of luxury living and destination tourism.

"In seeking international expansion, we chose a partner who would complement our strengths in large-scale development as well as share our view of investing for the long-term. We were attracted by MGM Mirage's superior assets, locations, and brands."

He said Dubai World's vision is to create a global portfolio of signature properties that will create value for generations to come.

"The CityCenter will redefine the luxury lifestyle and incorporate world-class elements of fine art and design, fulfilling our goal of creating landmark developments while further expanding into the important US real estate market. We look forward to making this project an international success and sharing in other opportunities for expansion."

The Dubai and US companies anticipate that the joint venture investment will close by the end of the year, and that the tender offer will commence during the week of August 27, 2007.

In connection with the joint venture, Dubai World will initially contribute approximately $2.7 billion for 50 per cent of the equity in CityCenter, which is targeted for completion in late 2009.

MGM Mirage will contribute the CityCenter assets which the parties have mutually valued at $5.4 billion, and receive 50 per cent of the equity in CityCenter. Following the close of the joint venture transaction, MGM Mirage will receive a cash distribution of $2.7 billion. By completing CityCenter on budget and on schedule, MGM Mirage will receive additional consideration of $100 million. The joint venture will obtain project specific financing to fund remaining project costs.

MGM Mirage will continue to serve as developer of CityCenter and upon completion, the joint venture will pay MGM Mirage a management fee to operate CityCenter's resort as well as the development's retail activities and the Vdara condo-hotel tower.

Terry Lanni, Chairman and CEO of MGM Mirage, said Dubai World's proficiency in real estate, combined with his company's operational expertise, strong brands and world-renowned resorts, creates competitive advantages that we believe will benefit all stakeholders.

"This transaction is immediately accretive to long term earnings and will have a profound impact on our balance sheet. Dubai World is making a significant investment in our company that will greatly increase our growth and earnings. We welcome Dubai World's long term commitment to our company through the joint venture and these share purchases," Lanni continued.

CityCenter features a Cesar Pelli-designed 4,000-room resort in addition to approximately 470,000 square-feet of retail and entertainment space, 2,650 luxury condominiums and condo-hotel units and two 400-room boutique hotels.