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MGM Mirage Hits Macau

By Jeff Hwang – Updated Nov 16, 2016 at 5:02PM

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A new casino deal gets the company through the door of the next "strip."

Fresh off of last week's $7.9 billion acquisition agreement with Mandalay Resort Group (NYSE:MBG) to create the world's largest casino operator, MGM Mirage (NSYE: MGG) is showing no signs of slowing down.

Monday, MGM announced that it had struck yet another deal to expand its empire, this time setting foot in the lucrative gaming market of Macau, a former Portuguese colony just west of Hong Kong. The deal has MGM in a 50/50 partnership with Pansy Ho Chiu-king, the daughter of casino mogul Stanley Ho, to build a new casino using the MGM Grand name. MGM Mirage suggested the casino could open by late 2006 on what is being labeled the "Strip," subject to approval by the government of Macau.

Until recently, Stanley Ho had long held a gaming monopoly in Macau.

Last month, Sheldon Adelson's privately held Las Vegas Sands -- which owns The Venetian on the Las Vegas Strip -- opened Sands Macau, becoming the first U.S.-based company to operate there. Wynn Resorts (NASDAQ:WYNN) will follow suit when it opens its own casino in 2006, with MGM Mirage being the third.

The deal is significant in that it gets MGM Mirage's foot in the door. Macau is being pegged as the next Las Vegas Strip, and the deal opens the possibility of further development in Macau. In addition, MGM Mirage will have better access to high-rolling Asian gamblers who want to visit Las Vegas.

The half-billion-dollar casino project will have less of an impact on MGM Mirage's income statement following last week's megamerger, given that it will represent a smaller portion of MGM Mirage's revenues. That said, this is an important strategic development with obvious long-term benefits.

Fool contributor Jeff Hwang owns none of the companies mentioned above.

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