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Casino Deals Put on Hold

The casino industry's two big acquirers, Harrah's Entertainment (HET) and MGM Mirage (MGG), are betting confidently that regulators will give their respective mergers the nod.

Analysts and investors are also voicing confidence the mega-mergers eventually will get regulatory approval, but wonder whether some local developments might delay the deals.

MGM Mirage must get approval from Illinois regulators for its $7.90 billion takeover of Mandalay Resort Group (MBG), unveiled last June. But the Illinois Gaming Board currently lacks enough members to conduct a vote. MGM Mirage and Mandalay still also must sell one of their Detroit casinos to comply with Michigan regulations.

Meanwhile, members of the Indiana Gaming Commission recently offered to resign amid a government shakeup, which could delay Harrah's acquisition of Caesars Entertainment (CZR) that was announced last July and is currently valued around $10.6 billion.

When Harrah's reported its fourth-quarter results last week, Gary Loveman, its chief executive, said the company remains optimistic it will complete its deal during the second quarter. MGM Mirage has said it expects its deal to close in the first quarter.

Observers are generally confident, too, that federal and state regulators will give the mergers the go-ahead.

The most important decision likely rests with the Federal Trade Commission, which could oppose the mergers on market-concentration grounds. If the FTC gives the go-ahead, state regulators are expected to fall in line. While nothing is a given, analysts said they increasingly have faith federal regulators won't oppose the mergers.

Each merger will create even bigger Las Vegas powerhouses. The combined MGM Mirage/Mandalay will have almost a dozen properties there, while Harrah's will have seven.

A key question for the FTC is how to define the gaming markets. Is Las Vegas such a global destination, and gaming now so mainstream, that the city's competitive market should include a broad range of leisure destinations like Disney's (DIS) Walt Disney World?

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