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US – MGM to buy remaining shareholding in Borgata for $900m

MGM Resorts is buying the rest of Boyd Gaming’s 50 per cent interest in Borgata Hotel Casino & Spa in Atlantic City, New Jersey for consideration of $900m.

Further, MGM Resorts will buy Borgata’s real property from MGM Resorts and lease back the real property to a subsidiary of MGM Resorts, after which a subsidiary of MGM Resorts will operate Borgata.

It will pay $600mfor Boyd Gaming’s 50 per cent interest, subject to customary working capital adjustments, after consideration of Borgata’s outstanding debt of approximately $600 million, which MGM Resorts will assume and refinance. For the last twelve months ended March 31, 2016, Borgata reported $812m in net revenues and $212m in Adjusted EBITDA.

"Borgata è il principale resort di Atlantic City e una grande aggiunta alla nostra crescente presenza nel nord-est", ha affermato Jim Murren, Presidente e CEO di MGM Resorts International. “Mentre il mercato continua a incontrare sfide, Borgata ha sovraperformato e si è differenziata come leader indiscusso in città. La nostra partnership decennale con Boyd Gaming è stata grandiosa e la talentuosa base di dipendenti di Borgata completerà e rafforzerà il nostro team MGM Resorts di oltre 60,000 membri in tutto il mondo. Siamo entusiasti dell’opportunità di portare nel resort il nostro programma fedeltà leader di mercato, M life Rewards, e di integrare le nostre operazioni, per posizionare Borgata per un’ulteriore crescita”.

Subsequent to the purchase of Boyd Gaming’s 50 per cent 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 $1.175bn.

“Siamo entusiasti di aggiungere Borgata al portafoglio MGP, diversificando ulteriormente la nostra presenza geografica. Con questa transazione, stiamo portando avanti la nostra strategia di crescita principale costruendo prudentemente un portafoglio di asset di alta qualità con posizioni competitive leader di mercato”, ha affermato James Stewart, CEO di MGM Growth Properties. “Ci aspettiamo che la transazione si traduca in un’elevata crescita percentuale a una cifra dell’AFFO per azione, e la leva finanziaria netta pro forma rimarrà simile ai nostri livelli attuali”.

Borgata will be added to the existing Master Lease between MGM Resorts and MGM Growth Properties Resorts, and the initial rent payment to MGP will increase by $100m. Consistent with the Master Lease terms, 90 percent of this rent will be fixed and contractually grow at two per cent per year until 2022.

"Le transazioni offrono numerosi vantaggi a MGM Resorts e creano un valore significativo per i nostri azionisti", ha affermato Dan D'Arrigo, vicepresidente esecutivo e direttore finanziario di MGM Resorts International. “Ci aspettiamo che MGM Resorts rimanga neutrale rispetto alla leva finanziaria, poiché consolidiamo completamente i flussi di cassa di Borgata nel portafoglio di MGM Resorts. Guardando al futuro, riteniamo che l’impatto delle Transazioni rimanga coerente con la nostra attenzione all’ulteriore riduzione dell’indebitamento del bilancio”.

Mr. Murren added: “We are pleased to demonstrate the ability for MGM Resorts and MGM Growth Properties to transact on an accretive basis to both parties and look forward to continue working collaboratively in the future.”

Keith Smith, President and Chief Executive Officer of Boyd Gaming, said: “The development and opening of Borgata in 2003 was an important step in the evolution and growth of Boyd Gaming. Under our leadership, Borgata firmly established itself as the East Coast’s most popular and successful entertainment resort throughout the last 13 years. While we are pleased with the performance of this property, this transaction is an attractive opportunity to immediately unlock significant value for our shareholders. We intend to use the proceeds to reduce debt, further strengthening our balance sheet and accelerating the timeline for reaching our leverage target of four to five times debt to Adjusted EBITDA.”

Mr. Smith added: “The consistent success of Borgata is a tribute to the entire Borgata team, as they have continued to outperform an evolving and challenging Atlantic City market. We thank them for their tremendous contributions to Borgata and Boyd Gaming, and we wish them continued success as they join the MGM team.”