Casino operator MGM Mirage on Friday launched a $4.85 billion unsolicited bid to buy rival Mandalay Resort Group and create the largest gambling company in the United States owning about a third of the Las Vegas Strip.
MGM valued the offer at $7.65 billion, including $2.8 billion in debt assumption, and said it would pay $68 per share in cash, a roughly 13 percent premium to Mandalay's Friday closing price.
The deal would merge the No. 3 and No. 4 US casino operators - which together have more than $6 billion in annual revenues - joining the swanky Bellagio, the pyramidal Luxor and other megaresorts, to top current leader Caesars Entertainment Inc and No. 2 Harrah's Entertainment Inc.
MGM's offer, which a person familiar with discussions said was made after some talks with Mandalay executives earlier this week, comes a day after Mandalay posted quarterly results which soundly beat all estimates and gave investors new confidence that Las Vegas was still on a winning streak with tourists.
Mandalay said in a statement that it had received the merger offer and would evaluate it carefully.
The merger offer comes as billionaire Kirk Kerkorian, 86, who controls MGM Mirage and has been a major investor on the Strip for over four decades, is cashing out of Hollywood studio Metro-Goldwyn-Mayer Inc.
Gambling stocks have soared by double and triple-digits in the last year as many companies have offered dividends and Las Vegas has cashed in on a fast-growing national appetite for glitz and gambling.
Mandalay is the fourth-largest casino company and has focused on luxury and entertainment more than gambling with recent expansions, recently opening the world's largest privately owned convention center and a new hotel at Mandalay Bay.
In addition it owns a number of less chic properties, such as the Luxor and Excalibur. MGM Mirage caters to wealthy gambling customers at the Bellagio and MGM Grand and has lower-tier resorts like New York, New York.
Mandalay and MGM Mirage have operations in a number of states outside Nevada, including Mississippi, Michigan, New Jersey and Illinois.