MGM Acquisition Of Borgata Could Have Significant Consequences For Online Gambling

Steve Ruddock June 1, 2016 2113 Reads
MGM buying Boyd out Borgata

After a decade as co-owners, MGM Resorts announced on Tuesday that it has acquired Boyd Gaming‘s 50 percent ownership in Borgata Hotel & Casino for the sum of $900 million. The acquisition puts Borgata, the undisputed crown jewel of Atlantic City’s casino industry, in the hands of MGM.

“Borgata is the premier resort in Atlantic City and a great addition to our growing presence in the Northeast,” said Jim Murren, Chairman and CEO of MGM Resorts International. “While the market continues to experience challenges, Borgata has outperformed and differentiated itself as the undisputed leader in the city.

“Our decade-long partnership with Boyd Gaming has been a great one, and Borgata’s talented employee base will complement and strengthen our more than 60,000-member worldwide MGM Resorts team. We are excited about the opportunity to bring our market-leading loyalty program, M life Rewards, to the resort and integrate our operations, to position Borgata for further growth.”

MGM will also undergo some asset reshuffling, as per the press release, MGM Growth Properties, a subsidiary of MGM Resorts, will become the new owners:

“Subsequent to the purchase of Boyd Gaming’s 50 percent stake in Borgata, MGM Resorts and MGP have agreed that MGM Resorts will sell all of Borgata’s real property to MGP for total consideration of approximately $1.175 billion.”

Deal could help facilitate legalization and interstate agreements

If we make an attempt to read the tea leaves, we start to see several companies positioning themselves to be major players in the U.S. online gaming industry. These developments could indicate we are poised for a second wave on online gambling legalization in the U.S., which is a welcomed sign for online gambling advocates who have been frustrated by several years of inaction.

If expansion occurs, multiple online gambling stakeholders will have national interests and realize a potential windfall from interstate agreements. This should make the barriers for interstate and even international agreements less daunting.

In the past, only Caesars and 888 were poised to benefit from New Jersey joining the interstate agreement signed by Delaware and Nevada. The way things are shaking out, several other companies could also reap the rewards of interstate agreements.

Caesars and 888 are on board

First and foremost, there is Caesars and its current iGaming partner, 888.

Caesars is active in Nevada and New Jersey, and 888 is active in all three legal U.S. markets. Furthermore, Caesars has a presence in, and 888 has already staked claims in, several presumptive markets, including Pennsylvania and California.

There would be little opposition to interstate partnerships being formed from 888 or Caesars if a new state were to come online.

Mohegan’s stealthy rise to power

Another company that has quietly positioned itself as a potential iGaming force in the U.S. is Mohegan Sun.

Mohegan runs Resorts Casino in Atlantic City and launched a real-money online casino in New Jersey last year, MoheganSun.com.

Mohegan Sun also operates a casino in Pennsylvania (considered the most likely state to pass online gambling legislation) — Mohegan Sun at Pocono Downs — as well as the original Mohegan Sun Casino in Connecticut. The latter is another state that could have online gambling aspirations provided interstate agreements were in place.

Add MGM to the mix

With their full acquisition of Borgata, MGM can also add its name to the above list of companies that might welcome interstate agreements.

Borgata is already the market leader in New Jersey, and the company could quickly launch an online gambling platform in Nevada. If this comes to pass, MGM could then add its voice to Caesars and 888 and push for New Jersey to join Delaware and Nevada in interstate online poker player pooling.

This scenario would require MGM to see potential in the Nevada market, which has become far more likely now that Nevada is toying with the idea of authorizing online casino games in addition to online poker.

With less than three million residents, online poker revenue in Nevada is unable to support more than one operator, but the addition of online casino games would increase potential revenue up to five-fold for operators.

Finally, MGM has a presence in Michigan, a state that jumped into the online gambling conversation this year.

Upshot

Over the coming years we could see Michigan, Pennsylvania and Connecticut (or a combination of these and/or other states) legalize and regulate online gambling, and with all three capable of benefiting, there would be support from Mohegan, Caesars and MGM to sign interstate agreements.

Image credit: Usa-Pyon / Shutterstock.com

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