By Adam Goldman
The Associated Press

LAS VEGAS - Shares of Mandalay Resort Group soared more than 16 percent Monday on news that MGM Mirage offered to buy the company for about $4.5 billion in a deal that would merge two of the world's biggest gambling companies.

MGM Mirage went public late Friday with a $68-a-share bid for Mandalay. MGM Mirage also would assume about $2.8 billion in debt.

"The combination of these two great companies would provide Mandalay shareholders with a premium price for their shares as well as providing several strategic benefits to shareholders in MGM Mirage," said Terri Lanni, chairman and CEO of MGM Mirage in Las Vegas.

The $68 offer represented an almost 13 percent premium over Mandalay's Friday closing price of $60.27, MGM Mirage said. That premium was wiped out in Monday trading, as investors anticipated a higher offer. Mandalay shares gained $9.96 to close at $70.23 on the New York Stock Exchange, where MGM Mirage shares fell $1.19, or 2.6 percent, to $44.84.

The Mandalay Resort Group's flagship property is its towering, gold glass Mandalay Bay hotel-casino on the south end of the Las Vegas Strip. It opened an almost 2-million-square-foot convention center there in January 2003 and added a tower with 1,117 suites, called THEhotel, in December 2003.

Among MGM Mirage's motel-casinos are the Mirage, Bellagio and MGM Grand.

The combined companies would allow MGM Mirage to capture a broad swath of the market in Las Vegas and establish it as the industry's top gambling company, surpassing both Caesars Entertainment and Harrah's Entertainment in revenues.

Mandalay Resort Group said it had received the offer and "will carefully evaluate the proposal from MGM Mirage and will respond to MGM Mirage in due course. Mandalay does not intend to make any further comment on this matter until it is finally resolved."

MGM Mirage made a friendly but unsolicited bid, according to negotiators, and talks have been under way for the past few days.

Any deal would need approval by the Securities and Exchange Commission, as well as gambling regulators in Nevada and other states in which the two have casinos.

MGM Mirage owns or operates 12 casinos in Nevada, New Jersey, Mississippi, Michigan and Australia, and has investments in two other resorts in Nevada and New Jersey. It has a 25 percent interest in British casino developer Metro Casinos Ltd.

Mandalay Resort Group owns and operates 11 casinos in Nevada and has about 15,000 rooms on the Strip. It has ownership in other properties in Nevada, Illinois and Michigan, and owns a hotel-casino in Tunica County, Miss.