MGM Resorts International is not buying the Sands Casino Resort Bethlehem, after all. MGM Resorts and Las Vegas Sands have been in talks for two months on a $1.3 billion deal to sell the most lucrative casino in Pennsylvania.
McCall reported that Sands executives have decided Sands Bethlehem's recent fiscal performance is the main reason LVS will not sell to a major rival. Sands Bethlehem is the smallest of Las Vegas Sands' casinos, but it is also well-situated to draw gamblers from the Philadelphia and New York City metropolitan areas.
Bethlehem Unlikely to Have Downtown Renewal
Local business and civic leaders had praised Las Vegas Sands as a "good neighbor" during its ten years operating in Bethlehem, Pennsylvania. At the same time, many quietly hoped for MGM Resorts to seal the deal. Las Vegas Sands has not developed the commercial property around the casino as some leaders had hoped, so the hope was MGM Resorts would do better in that arena.
Mark Juliano's Email to Staff
When Sands Bethlehem CEO Mark Juliano sent an email to employees of the casino in March, it was thought that the $1.3 billion deal was all-but-cinched. Usually, companies do not send such emails until a decision is made. Yet LVS executives back in Las Vegas never commented on their negotiations with one of its key rivals on the Vegas Strip and Cotai Strip. By most estimates, Las Vegas Sands Corporation and MGM Resorts International are the biggest and second-biggest casino companies in the world.
Instead, MGM Resorts last week quietly pulled out of the deal. Ron Reese, a spokesman for Las Vegas Sands Corp, told reporters on Monday, "We've never confirmed that sale talks were happening, but I can say that we will continue to operate Sands Bethlehem."
"Pretty Extraordinary Investment"
Ron Reese's comments mirrored those made by Sands Corp. President Robert Goldstein last month.
At the time, Mr. Goldstein said, "I think Bethlehem represents a pretty extraordinary investment in terms of what we put into the market versus what it returns to us, although it's a small number, obviously, relative to our other assets. It's still a compelling investment. We're very proud of it."
No one has said yet what the official reason for MGM's pullout is, though Pennsylvania's news outlets and online gambling media have offered their theories. One leading theory is MGM Resorts was spooked by possible changes to Pennsylvania's gambling laws, which would introduce airport gambling and reduce the overall revenues by raising taxes. Those laws, which a spokesman for State Sen. Lisa Boscola said might receive a vote this week, also would make it legal for online poker and daily fantasy sports in the state.
Why MGM Resorts Walked Away
If so, then the MGM Casino Resort Bethlehem might not have been as lucrative of a deal as the company had hoped. While other states have more casino operations than Pennsylvania, the high taxes on gaming receipts means that Pennsylvania has the second-highest set of tax revenues from casino gambling in the United States -- second only to Nevada. That certainly was a lure to MGM Resorts, but another tax hike might change the equation.
Las Vegas Sands Corp has let it be known that it does not like the proposed changes, either. The introduction of slot machine gambling in airport terminals, bars and taverns, and off-track betting facilities appears to be a particular trouble spot for LVS. Mark Juliano said those changes would "gut" the business model which allows Pennsylvania's gaming industry to generate $1.4 billion a year in tax revenues and employ 18,000 people.
Such doomsaying is common with business leaders when their competition level or tax percentage is set to go up, but in an industry with such high taxes, the Mark Juliano might well be right. That very proposition might have caused Las Vegas Sands to want to sell in the first place, and might be what caused MGM Resorts to walk away from the deal.
