Gaming | MGM-Boyd deal ends saga of US junket scrutiny

The exterior of the Borgata Hotel Casino & Spa in Atlantic City

MGM Resorts International finally reconciled its Atlantic City complications last week, after it agreed to buy Boyd Gaming’s half of Borgata Hotel for USD900 million. This conclusion comes after almost a decade of difficulties, after Nevada approved the 2007 MGM-Pansy Ho partnership in Macau, but New Jersey did not follow suit.
With Atlantic City’s approval, the last bastion of U.S. regulatory opposition to Macau’s junkets has faltered, according to a Forbes report.
New Jersey’s Casino Control Commission, concerned over junket connections to illicit activities such as organized crime and the evasion of currency controls, initially refused to recognize the partnership. The commission could not detach Pansy Ho from her father, Stanley Ho, who originally invited junkets to run VIP rooms in his casinos in 1986.
The commission decreed in 2009 that Pansy Ho was an “unsuitable partner” and required that either MGM Resorts break off its relationship with Pansy Ho, or that the group sells its portion of Atlantic City property, Borgata. MGM Resorts chose to sell its stake in Borgata due to the fact that Macau revenues easily outstripped those within Atlantic City, however the operator failed to find a buyer as the gaming market in Atlantic City collapsed.
Fortunately for MGM, New Jersey eventually relented and gave its “green light” to the partnership, resulting in MGM instead buying out Boyd Gaming’s half of Borgata, ending the nearly-decade-long saga.
Casino analyst Muhammad Cohen, writing for Forbes, says that the latest deal makes sense for both Boyd and MGM. “It helps Boyd shore up its balance sheet after spending USD600 million on properties in Las Vegas [… and] with those acquisitions and the Borgata sale, Boyd will nearly double to 65 percent its Ebitda from Vegas.”
At the same time, full ownership of Borgata Hotel might give MGM the edge in licensing contests as it seeks to enlarge its presence in the U.S.’ northeast by “outflanking [its] rivals.”
“If New Jersey approves new casinos on the doorstep on New York City, part of a plan to save faltering Atlantic City, the Borgata brand could give MGM Resorts an edge in that licensing contest,” Cohen stated, adding that it could provide an advantage to the group as it seeks greater business in the area.