Kerkorian’s Vegas Stake

MGM Mirage could be in for some financial restructuring or a sale following a recent announcement by majority shareholder Kirk Kerkorian’s holding company, Tracinda Corp.

Kerkorian, who holds a 56 percent stake in MGM, outlined his intent to purchase two of the casino giant’s largest assets and reconsider his investment in the rest of the company.

In the statement, released a day before MGM’s annual shareholder meeting May 22nd,Tracinda said it "intends to enter into negotiations with MGM Mirage to purchase the Bellagio Hotel and Casino and City Center properties," while pursuing "strategic alternatives with respect to its investment in MGM Mirage which may include financial restructuring transactions involving all or a substantial portion of the remainder of the company."

In turn, MGM announced its board has chosen a committee of "non-management, independent directors" to "consider Tracinda’s statement and strategic alternatives" for the company.

Shares in the company rose 27 percent following the announcements.

If his move for the Bellagio and City Center properties proves successful, Kerkorian stands to reposition himself against onetime competitor Steve Wynn, the Wall Street Journal reported. Apparently, a fierce rivalry between the two died down after MGM acquired Wynn’s Mirage, but Kerkorian’s ownership of the hotel and mixed-use development could leave the two battling for Las Vegas’ luxury market once again.

But negotiations will be subject to shareholder and regulatory scrutiny.

Jason Ader of Hayground Cove Asset Management told the WSJ the proposal was outrageous.

"On the surface it stinks of an inside deal. He is trying to cherry-pick the best assets and growth from the public company," Ader said.

And the publicly traded company’s board consists of many friends or business associates of Kerkorian, who will have to walk a fine line to avoid conflicts between his interests and those of minority shareholders, the paper said.