"One of the things that makes Vegas so intriguing is that it's constantly changing," says Station Casinos's Christenson. "The face of the Strip 10 years ago was dramatically different than it is today, and that's what gives us a competitive edge as a destination."

Even if there will be fewer competitors. While Forst expects a quiet period in which the acquiring giants will "need to digest these deals," he and others see more acquisitions as inevitable. Harrah's Atwood agrees. "I would not be surprised to see more consolidation," he says. "There are lots and lots of smaller companies."

Kate O'Sullivan is staff writer at CFO.

A Matter of Trust

The MGM-Mandalay and Harrah's-Caesars deals will certainly create two gaming giants. But will they be as big as the companies intend?

"There will be more regulatory scrutiny on the two deals than either one would have had on its own," says KeyBanc Capital Markets gaming analyst Dennis Forst. And whether divestitures will be required will depend on how the Federal Trade Commission defines the competitive market geographically. If regulators look carefully at city markets such as Las Vegas and Atlantic City, where the merging companies have significant concentrations of hotel-casinos, some property sell-offs may be required.

Top executives at the merging businesses, however, expect few such constraints. MGM Mirage president and CFO James Murren told analysts that the company had carefully vetted the deal with lawyers, taking into consideration both federal antitrust concerns and state regulations.

While the company must shed one property in Michigan, where state law prohibits any casino operator from holding more than one license, he says, "we have no intention at this time of divesting any other properties."

Harrah's CEO Gary Loveman told analysts it was "likely" that the company would divest properties in Mississippi, Indiana, and possibly in Lake Tahoe, Nevada. The issuance of new licenses in the Pennsylvania market, Loveman suggests, may lessen the impact of Harrah's and Caesars both having an Atlantic City presence.

But some in the industry speculate that the combined MGM Mandalay will eventually unload at least one Strip property — Mandalay's Luxor, Circus Circus, and Excalibur are candidates — and suggest that Harrah's Atlantic City concentration could cause FTC concerns. In both the MGM and Harrah's cases, "there may be an opportunity for some little guys to acquire some choice properties that get divested," says Ken Ritt, a partner in Stamford, Connecticut, law firm Day, Berry — Howard.

The two casino giants are prepared for long government reviews. MGM expects its deal to close in the first quarter of 2005, while Harrah's says its may be finalized as late as July. —K.O'S.

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