On February 23, 2000 MGM Grand, Inc. announced its intention to acquire Mirage Re- sorts, Inc. Over a three day window beginning the day before the announcement, MGM Grand’s market value fell by more than 3 percent on a risk-adjusted basis. Prior to the acquisition, Mirage had been the casino earnings leader in in Las Vegas, followed by MGM Grand. At the time MGM Grand was anxious to grow, as it faced increased com- petition in the casino market. Analysts judged that the deal was a good one because MGM Grand’s management had a better reputation for cost-containment and attention to the bottom line than did Mirage Resorts. Because of a competitive bid from competitor Harrah’s, MGM Grand was forced to increase its bid for Mirage from $17 per share to $21 per share. Notably, Mirage’s stock price had been $11 the previous year. To finance the deal, MGM Grand incurred a debt of $2 billion, believing that it could increase its earnings and free cash flow from its gaming returns. Shortly after the acquisition, MGM Grand began to seek other expansion projects, and subsequently acquired 55 acres of prime real estate on the Las Vegas Strip for its City Center project, as described in the minicase to Chapter 4. Apply the concepts and ideas discussed in Chapter 10 to analyze MGM Grand’s acquisition of Mirage Resorts.