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Posted At : January 9, 2009 04:44 PM | Posted By : D McKee
Related Categories:
Wall Street,Herbst Gaming,MGM Mirage,Atlantic City,Current,Mississippi,The Strip,Entertainment,Economy,Movies
Sneaking the news out late on Friday (after the markets close, heh heh), MGM Mirage is writing off $1.2 billion in 4Q08. So the the fourth quarter is down the toilet and perhaps the whole fiscal year along with it. MGM is attributing $1.2 billion of the writeoff to "goodwill" from its Mandalay Resort Group purchase. plus $47 million toward Mirage Resorts. (I'd say if you "only" overpaid $47 million for six-pack of Steve Wynn properties, plus beaucoup land in Atlantic City, you got a good deal.)
MGM Mirage shareholders watch their money go up in flames.
"Goodwill is the amount exceeding fair market value that is paid for an acquisition," reports The Associated Press. Which is MGM's fancy way of saying, "We overspent" (big-time, in the case of Mandalay) and that it's having buyers remorse about Mandalay Bay, Excalibur, Luxor and Tunica's Gold Strike. One of the most famous "goodwill" writeoffs -- perhaps the most famous -- was the bath taken by stakeholders in the AOL/Time-Warner conglomeration, after AOL's value proved to be nowhere near as high as it had been talked up.
At least the Herbst Gaming fraternity can take some cold comfort from today's news. After all, they just had to jettison all the "imaginary value" ... er, "goodwill" associated with their acquisition of three Primm Valley casinos from MGM, a deal in which Herbst got taken to the cleaners and then put through the trouser press for good measure.
Could this revaluation of six of its 10 Strip properties (including Bellagio, The Mirage and the soon-to-be-Ruffinized Treasure Island), plus one in Mississippi, be CEO Jim Murren's way of hanging out the "For Sale" sign? I'll leave that debate to wiser heads than mine.
Is Blu-Ray worth it? I dunno but maybe this guy does. Have a great weekend.
Goodwill is the amount exceding the fair market value OF TANGIBLE ASSETS AND LIABILITIES ACQUIRED. It is the value of the clients and suppliers portfolio, trained workforce and all intangible assets that makes up a company and its power to generate profits in the future. MGM did not "overpaid" $1.2 billion for Mandalay - market value of Mandalay dived and they were forced to recognize this devaluation.
So Mirage, Treasure Island, Bellagio,Mandalay Bay, Excalibur and Luxor are worth less now than when MGM bought them but New York-New York, Circus Circus, Slots-a-Fun and Monte Carlo aren't? Or could it be that they're contiguous to bigger MGM Mirage projects (CityCenters I & II) and therefore a lower priority for retention?
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