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The New Jersey Division of Gaming Enforcement determined that Pansy Ho, MGM's Joint Venture Partner in Macau, was unsuitable.  The Division can only make recommendations and the final determination will come from the New Jersey Gaming Commission.  While Nevada has already signed off on the deal, New Jersey is flexing its muscles.  This was always a risk for MGM but it seemed to matter more when expectations for MGM Macau were much higher. 

If the Commission follows the Division's recommendations, MGM will be forced to exit its JV in Macau or its JV in Atlantic City (The Borgata with BYD).  Exiting the former is more likely.  The good news for MGM is that MGM Macau generated less than $100 million in EBITDA over the past 12 months, well below initial expectations of $200-300 million.  The property is clearly worth much more than the current EBITDA run rate would suggest.  Due to the forced nature of the sale, MGM will likely receive less than the property is worth.  However, due to the depressed nature of the EBITDA, net proceeds will still be a large multiple of current EBITDA, meaning the transaction will likely be deleveraging. 

The negative for MGM is that they may have to give up future growth opportunities in Macau, same store revenue and new store growth.  However, it is doubtful that there is much Macau value residing in MGM's stock.