Casinos never confirmed $1.3 billion sale
The Allentown Morning Call reported the collapse of the deal on Tuesday. No one officially went on the record to discuss why the deal fell through. That is not surprising though, considering the two casinos stayed completely mum on a possible sale so far.
Nonetheless, there was a pile of evidence indicating the sale was going to happen, including an internal email to Sands employees and comments about the deal from Bethlehem Mayor Robert Donchez.
The sale made sense for both businesses as well. MGM Resorts is slowly building up an arsenal of East Coast casino resorts and is eager to get in the online casino game.
Sands owner Sheldon Adelson, on the other hand, is ardently anti-online gambling. With that in mind, it makes sense he would see his Pennsylvania casino, as it is a state where online gambling is looking increasingly likely to pass. Also worth noting the fact Sands’s casino portfolio is more about international destination resorts instead of local casino.
If the deal could work out so well for both parties, what exactly went wrong then?
Recent casino expansion legislation might have scared MGM off
The Morning Call suggests recent actions in the state Senate might be the reason the deal fell through. What part of the online gambling legislation the company is worried about is still a mystery. There are a few possible explanations though.
Anti-online gambling stance?
The Morning Call implies the issue is a wariness about online gambling cannibalizing the company’s investment in the brick and mortar property.
This does not really jive with MGM’s profile though. The company is jumping head-first into the New Jersey online gambling market. Owning BorgataPoker and BorgataCasino is not enough, as the group is launching playMGM-branded real-money sites as well.
In other words, this is a casino company who likely wanted into Pennsylvania because of the online gambling opportunities. That is, if the situation is desirable.
Ineffective online gambling legislation?
It could be that MGM is bullish on online gambling but sheepish about this particular bill. The hope is the current proposal changes in the house, but it currently boasts substantially higher tax rates than brick and mortar gambling. Additionally, there are hefty licensing fees for individual poker and casino licenses.
As is, the current state of the bill makes it difficult for casinos to thrive with online ventures. Perhaps it is that MGM is wary of the specifics of the bill, not the concept of online gambling itself.
Casino host fee
Within the bill, the legislature is trying to fix the outstanding issue of the $10 million casino host fee. With the previous fee ruled unconstitutional, Sands Bethlehem very publicly stated it had no intention of volunteering to pay the sum like other casinos. MGM previously seemed amenable to paying the annual fee, but there is a chance it is a sticking point in bargaining for the sale.
Whatever the reason, the sale is off for now. Meanwhile, the $90 million expansion of the Sands is still on hold for the time being.