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Feds Eye MGM Mirage-Mandalay Union

MGM Mirage's (MGG) merger with Mandalay Resort Group (MBG) will have to hop through another hurdle, after the Federal Trade Commission asked the duo to provide more information related to their $4.8 billion merger deal.

The companies said they would comply promptly with the FTC's second request for information, which was announced Monday morning, and anticipated the deal would close sometime in the first quarter of 2005, in line with its earlier guidance. News of a second request from the FTC is unsurprising, given the size and scope of the transaction, the concentration of properties it would create on the Las Vegas Strip and the consolidation going on in the industry.

All told, the combined companies would own 28 gaming properties, 10 of which can be found on the Las Vegas Strip, giving it near-complete control over a three-mile stretch of properties, concentrated mainly on the city's west side. According to research from UBS, MGM would control 48% of the gaming positions, 46% of the square footage and 49% of the hotel rooms on the Las Vegas Strip.

With so much concentration in one place -- and with Harrah's Entertainment's (HET) planned acquisition of Caesars Entertainment (CZR) creating a rival behemoth -- there are a number of antitrust concerns over both mergers. Already, MGM will have to sell a property in Detroit, where the combined companies would own two casinos, which violates gaming regulations.

More asset sales could be forced as well, depending on how the FTC defines competition. MGM has vowed to keep its properties on the Strip, arguing that the growing market is rife with competitors like Wynn Resorts (WYNN), which will open the 3,500-room Wynn Las Vegas in April 2005, and Sheldon Adelson, who plans to grow his Las Vegas empire beyond the Venetian Hotel & Casino.

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