Updated from 10:10 a.m. EDT

In a surprise move, billionaire investor Kirk Kerkorian dropped his efforts to buy two of

MGM Mirage's

(MGM) - Get Report

prime Las Vegas properties, instead backing the casino operator's plan for a new joint venture that will monetize other real estate assets at the company.

MGM shares were down $5.63, or 6.5%, to $80.87 Wednesday, since the new plan means the company likely won't be sold anytime soon. The stock has surged more than 30% over the past month since Kerkorian, who owns more than half of MGM's shares, announced that he wanted

to buy MGM's Bellagio casino and its City Center development.

Analysts had speculated that Kerkorian's interest would set the wheels in motion for a sale of the entire company or other prime assets. MGM had formed a special committee to review potential transactions, but said Wednesday that the committee had been dissolved.

While a sale of the company might no longer be in the cards, MGM announced a new joint venture to unlock real estate value for land it owns on the northern part of the Las Vegas strip, near where

Boyd Gaming

(BYD) - Get Report

just broke ground on its

Echelon Place development .

MGM said it would partner with Kerzner International to jointly develop a multi-billion-dollar resort on 40 of the 78 acres MGM owns on the corner of Las Vegas Boulevard and Sahara Avenue.

To watch Brittany Umar's video take of this column, click here


MGM Mirage will provide the land, which is being valued at $20 million per acre. Kerzner, which owns the Atlantis Paradise Island resort in the Bahamas, will contribute cash equity, so that each party owns 50% of the project.


reported in April that MGM was eying the creation of such joint ventures to extract value for shareholders in light of surging real estate prices in Las Vegas.

"We see this type of relationship as a major part of our company's future," said Terry Lanni, chairman and CEO of MGM, in a statement. "Our considerable real estate holdings, combined with our experience and efficiencies in developing major entertainment resort properties, are unmatched.

"We believe this joint venture could well serve as a model for similar transactions which we think could further enhance shareholder value by accelerating growth and conserving our capital, allowing us to pursue other growth opportunities and/or return excess capital to our shareholders," he added.

The company's signal that it could pursue other similar deals helped to mollify Kerkorian. His firm, Tracinda Corp., said Wednesday that the Kerzner deal "demonstrates that there is significant potential to unlock value for

MGM's shareholders through a variety of strategic transactions involving the company's assets."

Tracinda said it will continue to monitor its investment in MGM and evaluate opportunities to enhance shareholder value.

Analysts had been crunching their numbers on how much all of MGM's assets taken together might be worth ever since Kerkorian began angling for change at the company. At the time he announced his interest in the Bellagio and City Center in late May, the stock was trading around $63.

The rough magic number on the stock's upside was $100, according to several analysts. Some thought an even higher valuation would be achieved.

"The sum of the parts is more attractive. It's always very attractive. People thought it could be reality. But if the company can't be split up, you'll never see $100 per share," says a buyside investor who declined to be named. He owned the stock for some time before selling his firm's entire MGM position prior to Wednesday's news, when the stock was in the low $80s.

With so much of the upside now gone, this source says MGM could fall back to the $65 to $70 range. You can even make a case for the stock being in the $50s, he adds.

As for Kerkorian, there are numerous theories floating around the gaming industry as to why he dropped out.

Some are speculating that Kerkorian announced his intention to buy the two assets just to give his own stock value a boost. The other theory is that MGM didn't want to give up its jewels and may have wanted a huge valuation for the Bellagio.

Either way, without the big deal Wall Street expected, MGM shareholders are now left without much further upside in the stock.