Boyd Gaming said Tuesday it's selling its 50 percent stake in Atlantic City's top casino to MGM Resorts International, which owns the other half.
It will get $900 million plus half of any future tax settlement MGM reaches with Atlantic City.
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. MGM Resorts International CEO Jim Murren said the company has faith in the Borgata despite Atlantic City's recent financial struggles.
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"We believe Borgata's best days are yet to come," he said. "When you've got a great property that's carefully cared for in a market as large as Atlantic City, you can and should do well."
Boyd said it will use the proceeds to reduce debt and strengthen its balance sheet.
"While we are pleased with the performance of this property, this transaction is an attractive opportunity to immediately unlock significant value for our shareholders," Boyd CEO Keith Smith said.
Boyd expects to receive $600 million in cash after deducting its share of the Borgata's 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.
Murren said he was encouraged by a financial rescue package approved by state lawmakers and signed into law last week by Republican Gov. Chris Christie, but he said the company would have made the deal even without it.
"I just never believed Borgata and Atlantic City would be ignored by the state of New Jersey," he said.
Following the acquisition of Boyd'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 its 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 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.