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Blackstone in talks to buy Bellagio and MGM Grand

Tourists view the water fountains at the MGM Resorts International Bellagio Resort & Casino in Las Vegas, Nevada, on April 25, 2018. (Bridget Bennett / Bloomberg)
By Scott Deveau, Gillian Tan and Christopher Palmeri Bloomberg

Blackstone is in advanced talks to buy and lease back the iconic Bellagio and MGM Grand Las Vegas casinos from MGM Resorts International, according to people with knowledge of the matter.

They have yet to agree on a transaction, and one may not be reached, said the people, who requested anonymity because the talks are private. The terms of the potential deal couldn’t be learned.

Representatives for Blackstone and MGM Resorts declined to comment.

MGM Resorts shares rose as much as 5% before settling up 2.13% at $29.69 in New York at the market’s close.

MGM Resorts has been exploring selling and leasing back the properties individually or bundled together, Bloomberg News reported in July. Property sales free up cash for casino companies to expand while letting them continue to manage their resorts.

The Las Vegas-based company in January formed an independent committee to evaluate ways to extract value from its real estate portfolio. Activist investor Starboard Value built a position in the company with plans to push for changes, Bloomberg News reported that month.

“A Blackstone deal to buy and lease back Bellagio and MGM Grand – in advanced talks, Bloomberg reports – could raise $6.5 billion-$7 billion for a $10 billion resort in Osaka, Japan, where MGM will vie for a license,” said Brian Egger, Bloomberg Intelligence gaming analyst.

MGM Resorts expects to share the results of the review in early fall, Chief Executive Officer Jim Murren said in a conference call with analysts in July.

The Bellagio and MGM Grand Las Vegas are two of the crown jewels in MGM Resorts’ portfolio of gaming resorts in the U.S. and China. Together, the properties have more than 10,000 rooms and about 315,000 square feet of casino space, according to the company’s most recent annual report.

MGM Resorts could receive proceeds of up to $4 billion selling the Bellagio and nearly $3 billion from a sale of MGM Grand, analysts with Bloomberg Intelligence said in July.

Blackstone, a New York-based private equity firm, has built up a hefty war chest for real estate transactions. Last week, it said it raised $20.5 billion for its ninth real estate fund, topping the $15.8 billion it raised for its predecessor vehicle.

The firm has a history in the gaming sector. Its holdings include Spain’s Cirsa Gaming, which it acquired last year for about $1.8 billion, and the Cosmopolitan of Las Vegas, which it acquired in 2014 for $1.7 billion.