Boyd Gaming sells its 50 percent stake in Borgata to MGM

ATLANTIC CITY - Boyd Gaming said Tuesday it is selling its 50 percent stake in Atlantic City's top casino to MGM Resorts International, the company that owns the other half.

It will get $900 million, plus half of any future tax settlement MGM reaches with Atlantic City.

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After the deal closes in the third quarter of this year, MGM will own all of the Borgata, which has been Atlantic City's top-performing casino since shortly after it opened in 2003.

"Borgata is the premier resort in Atlantic City and a great addition to our growing presence in the Northeast," said Jim Murren, chairman and CEO of MGM Resorts International, in a news release. "While the market continues to experience challenges, Borgata has outperformed and differentiated itself as the undisputed leader in the city."

Boyd said it will use the proceeds to reduce debt, strengthen its balance sheet, and accelerate the timeline for reaching its leverage target of four to five times debt to adjusted earnings.

"While we are pleased with the performance of this property, this transaction is an attractive opportunity to immediately unlock significant value for our shareholders," company president and CEO Keith Smith said in a news release.

Boyd expects to receive $600 million in cash after deducting its share of the Borgata's current outstanding debt.

The transaction includes the Borgata casino and hotel, and its non-gambling Water Club hotel next door in the city's Marina District.

Following the acquisition of Boyd Gaming's interest, MGM Growth Properties LLC will acquire Borgata's real property from MGM Resorts and lease back the real property to a subsidiary of MGM Resorts, after which a subsidiary of MGM Resorts will operate Borgata.

The Las Vegas companies Boyd and MGM have been partners in the Borgata, which reported first-quarter net revenue of $812 million, and $212 million in adjusted earnings. Boyd had been the hands-on operator of Borgata.

MGM decided in 2010 to sell its stake and leave New Jersey rather than cut ties to an Asian business partner in Macau, but a buyer was never found. In 2014, declaring that conditions with its Macau business partnership had sufficiently changed, New Jersey casino regulators allowed MGM back into the Atlantic City market to reclaim their 50 percent share, which had been held in a trust while a buyer was sought.

The Borgata is owed about $180 million in back tax appeals and interest from the cash-strapped Atlantic City government in a case that has yet to be resolved. A judge has let the Borgata stop paying its property taxes as long as the city is unable to pay the casino what it owes in successful tax appeals.

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