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Dubai gambles on Las Vegas casino giant MGM Mirage

Gambling is considered illegal in Dubai, yet Dubai’s state owned investment company, Dubai World, bought a piece of Las Vegas on Wednesday, announcing an investment of US$5 billion in MGM Mirage.

MGMDubai World, the state-owned investment firm in this fast-growing Persian Gulf emirate, will pay US$2.7 billion to acquire a 50 percent stake in CityCenter, a 76-acre urban metropolis with upscale hotels, condos and retail to open by 2009.

The transaction also includes up to $2.4 billion in stock purchases, giving Dubai World an approximately 10 percent interest in MGM. Some of the shares will be purchased through an $84-a-share tender offer, a 13 percent premium to Tuesday’s closing price of $74.32.

The company, owned by the ambitious ruler of Dubai, Emirates’ Vice President and Premier Sheik Mohammed Bin Rashid al-Maktoum, also intends to acquire an additional 14 million shares from public shareholders, the company said Wednesday.

“The announcement today brings together two companies known for creating landmark developments that have the ability to change the face of luxury living and tourism,” said Sultan Ahmed bin Sulayem, Chairman of Dubai World.

“Our vision is to create a global portfolio of signature properties that will create value for generations to come,” Bin Sulayem said.

Dubai World became known inthe US when its subsidiary, Dubai Ports World, was forced to sell its U.S. port operations over security concerns in the United States last year.

Dubai World also recently bought control of the Barneys New York department store.

Shares of MGM gained $5.77, or 7.8 percent, to $80.09 in morning trading. The stock has been trading in the $34.56 to $88.69 range in the past 52 weeks. Boyd Gaming’s stock added $1.43, or 3.7 percent, to $40.59. Its shares have traded between $33.80 and $54.22 in the past 52 weeks.

Elsewhere in the gammbling sector, Las Vegas Sands Corp. (NYSE: LVS) gained 79 cents to $98.68, while Wynn Resorts Ltd. (Nasdaq: WYNN) added $1.54 to $118.29.