Contractual provisions

If the New Jersey Gaming Control Commission rules Pansy Ho unsuitable as a partner for MGM MIRAGE in Macau, it would trigger a clause in the joint venture contract between the two partners.

The clause outlines the conditions under which MGM would be allowed to cash out its share of the partnership according to documents seen by the South China Morning Post.

The terms are as follows:

MGM has three days to notify Ms Ho and the Macau government of a formal finding of ‘unsuitability’;

MGM and Ms Ho then have 90 days to explain the situation to the Macau government;

MGM and Ms Ho have another 90 days to ‘use all reasonable endeavours’ to get New Jersey to withdraw its ruling;

Failing that, MGM has 30 days to decide whether to sell its Macau stake. The alternative would probably be to sell its 50% stake in The Borgata in Atlantic City.

If MGM decides to sell out of Macau, it has 90 days to work with Ms Ho and the local government to identify three potential buyers for the stake and to secure a financial adviser to launch an auction process. After the auction is finished, MGM has 30 days to identify its preferred bidder to Ms Ho and the government. Ms Ho then has 60 days to match the offer, or to appoint a third party to match the offer.

If Ms Ho doesn’t make an offer, the sale to MGM’s chosen bidder proceeds. That firm must in turn offer to buy out Ms Ho’s share in the Macau venture at the same price. Ms Ho can sell all, part or none of her stake as she likes. The auction process up to this point could take more than a year.