MGM Resorts International agreed to purchase Empire City Casino and Yonkers Raceway for $850 million, including roughly $245 million in debt that it intends to refinance. Should the state award Empire City a license for live table games by 2023, MGM will pay an additional $50 million for the racino and racetrack. Located just 15 miles from Times Square, Empire City controls roughly 40% of gross gaming revenue in the NYC market and is considered one of just two profitable casinos in the area (Resorts World being the other). The transaction is expected to close in Q1 2019 pending regulatory approval.
Howie Long-Short: CEO Jim Murran can talk all he wants about how this deal enhances the company’s “free cash flow profile”, but MGM did this deal as a means of entering the New York market; they were shut out when the state issued four new gaming licenses about five years ago. MGM will want to cash in on the legalized sports betting craze set to occur, but they’ll need the state legislature to draft new legislation before they can take a sports bet; state law currently authorizes just four upstate casinos to take bets on sporting events. It’s reasonable to suspect that will occur – perhaps as early as this fall.
Adding a sports betting license would be a boon to Empire City Casino, but Alan Woinski (President of Gaming USA Corp.) was more concerned about the amount MGM paid for the property than the status of its sports betting license. Woinski believes it was “a very, very high multiple to pay for a casino that doesn’t have table games.” That’s important piece to consider if you realize that sports betting represents just +/- 2% of all gaming profits generated in Las Vegas. It should be noted that NY law would allow for full-scale casino licensing as early as ’21. MGM shares are up +2% (to $31.89) since the report broke.
Looking for a company that maintains a big presence in the state of New York, but lacks widespread name recognition within the U.S? Check out Genting Group (OTC: GEBHY). The Malaysian company has been developing, marketing and operating casinos around the world for the last 50+ years. They own Resorts World New York City at Aqueduct Racetrack in Queens, the largest racino in the U.S. Unlike Empire City Casino, Resorts World currently offers table games.
Fun Fact: Yonkers Raceway will be the first horse racing track that MGM has ever owned.
Fan Marino: For the last 46 years, Yonkers Raceway has been owned by the Rooney family. If that last names sounds familiar, it’s because they also happen to own the Pittsburgh Steelers. Art Rooney founded the team in 1933 (as the Pittsburgh Pirates) and won four Super Bowls. His son Dan ran the team from 1988-2017 and won two more. Art Rooney II now maintains control of the franchise.
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