Mumbai: Dubai World, the investment arm of the Dubai government, will acquire a 9.5 per cent stake in MGM Mirage and 50 per cent of the casino operator's CityCenter development project for $5 billion, a source close to the developments said.

Under the deal, Dubai World will pay $2.7 billion to acquire a 50 per cent stake in CityCenter - a $7.4 billion project comprising hotels, condos and retail outlets and spread over 76 acres in Las Vegas, due to open in 2009.

Dubai World will also buy 14 million shares from MGM Mirage at $84 each, or about $1.2 billion, which is a 13 per cent premium over its August 21 closing price of $74.32 on the New York Stock Exchange.

The investment firm said it also intends to buy an additional 14 million shares from the public at about the same price.

The stake purchase by Dubai World, which was first reported by the Wall Street Journal, will likely quell takeover talk surrounding the second-largest casino company.

Kirk Kerkorian's investment firm Tracinda Corp, MGM's majority shareholder, in May said it planned to buy MGM's Bellagio and CityCenter projects and would explore alternatives for its 56 per cent stake in MGM.

Kerkorian, however, backed off the plan in June after MGM agreed to develop a new multibillion-dollar resort on property it owns on the north end of the Las Vegas strip.

The project is to be financed by Kerkorian partner Kerzner International Holdings Ltd., which owns the mammoth Atlantic resort in the Bahamas.

Dubai World will pay an additional $100 million if CityCenter opens on budget and by the end of 2009.

Dubai World's investment gives MGM Mirage a $3.9 billion cash infusion. And Kerkorian's stake in MGM Mirage will shrink slightly to 51.65 per cent from 54.15 per cent, the Journal said, but he will remain the majority shareholder through.

Dubai World's portfolio includes British ports operator P&O. Its private equity arm, Istithmar, last year bought a majority stake in the Mandarin Oriental New York, acquired retailer Loehmann's, the Knickerbocker Hotel in New York and office block 280 Park Avenue in April.