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Deal’s off: MGM not buying Sands Casino Bethlehem, sources say

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Matt Rourke / AP

Sands Casino Resort Bethlehem is shown Wednesday, Feb. 25, 2015, in Bethlehem, Pa.

The $1.3 billion deal to sell Sands Casino Resort Bethlehem to MGM Resorts International has collapsed, according to multiple sources.

What would have been one of the largest property sales in the history of the Lehigh Valley faltered late last week and MGM ended its pursuit of the Bethlehem casino complex, sources with knowledge of the deal told The Morning Call.

While city officials have called Sands a good corporate neighbor that has built arguably the most successful casino in Pennsylvania, some were quietly rooting for MGM to take over in the hopes that it would move more quickly to develop the rest of the former Bethlehem Steel lands now owned by Sands.

Sands Bethlehem CEO Mark Juliano in March sent an internal letter to employees telling them the casino had an interested buyer. While sources have told The Morning Call that Las Vegas-based MGM Resorts International offered nearly $1.3 billion to buy the casino, Sands parent company Las Vegas Sands Corp. never commented.

"We've never confirmed that sale talks were happening, but I can say that we will continue to operate Sands Bethlehem," said Las Vegas Sands Corp. spokesman Ron Reese, before referring to comments made last month by Sands Corp. President Robert Goldstein during the company's first-quarter earnings call.

"I think Bethlehem represents a pretty extraordinary investment in terms of what we put into the market versus what it returns to us, although it's a small number, obviously, relative to our other assets," Goldstein said in the call. "It's still a compelling investment. We're very proud of it."

MGM spokeswoman Mary Hynes said Tuesday the company had "no comment at this time."

The collapse appears to bring an end to a several-months flirtation between the world's largest gambling company, Las Vegas Sands, and the second largest, MGM.

It remains unclear why the sale fell through, but analysts have said changes proposed by the state Legislature could be enough to give a potential buyer pause. A Senate committee this week weeded through amendments that could lead to gambling in airports, fantasy sports leagues, internet gambling and more, reducing casinos' share of gambling dollars. The Senate could vote on those amendments Wednesday, according to Joseph Kelly, spokesman for state Sen. Lisa Boscola, D-Northampton.

Reese would not discuss any sale talks but confirmed that Sands is uneasy with the recent proposals in Harrisburg. Sands Bethlehem has steadfastly opposed internet gambling and any legislation that would allow people to gamble outside the casino in places such as airports, taverns and off-track betting facilities. Juliano has argued that the proposals would gut the successful casino model that's generating $1.4 billion in state taxes and employing more than 18,000 people.

Sources said sale talks prompted Sands to halt its $90 million expansion plan until negotiations concluded.

Reese confirmed Tuesday that the project may be killed if legislators expand gambling too much.

"Any future investment in Sands Bethlehem will be dictated by the actions of the state Legislature," Reese said. "If job-killing policies that expand gambling are put in place, it's infeasible to reinvest in this property."

Mayor Robert Donchez said he would urge the Sands -- or any future owner -- to push forward with that expansion not only for gambling but for other parts of the Sands property that is undeveloped.

The Sands, which redeveloped part of the former Bethlehem Steel plant, is also a managing owner for the company owning the old No. 2 Machine Shop, the Steel General Office Building and other vacant buildings that have been sitting idle since the plant shut down two decades ago.

Of particular interest to the mayor is the Sands-owned lot near Polk Street for which the city has secured a $1 million grant to build a parking garage, the linchpin in additional South Side redevelopment.

"It's very important for the Sands or MGM to continue developing the site, and if they are not interested in developing the site, consider selling off parcels to developers who are," said Donchez, adding he was surprised to learn the deal had dissolved.

Roger Hudak, the South Side Task Force chairman, hopes that Sands continues building.

"It doesn't matter to me who owns it, as long as they continue to invest," he said. "Let's get on with it."

Sands opened with more than 3,000 slot machines in 2009, and soon after table games were legalized in 2010 became perhaps the state's most successful casino, partly on the strength of thousands of gamblers traveling from New York City and northern New Jersey. In March, it posted record revenues from tables games and then broke that record in April.

With a total investment of nearly $900 million, Sands is the only casino in the state with a 300-room hotel, outlet shopping mall and concert venue. The complex employs more than 2,500 people and attracts 9 million people a year to south Bethlehem.

The sale would have allowed Sands to focus on its massive destination resorts in Las Vegas and Asia, while MGM bolstered its regional casino model. Buying the Sands would have expanded MGM's footprint in a region where it has been growing fast. MGM National Harbor opened in Maryland last year, and the $950 million MGM Springfield is under construction and set to open next year in the latest state to approve casino gambling, Massachusetts. MGM also operates the Borgata, Atlantic City's most lucrative casino.