Oct. 22 (Bloomberg) -- Dubai World, the state-owned investment group that agreed to invest as much as $5.1 billion in MGM Mirage, stopped buying shares in the world's second- largest casino company because they were overpriced, its chairman said.

``We kept buying when the share price was good, and when the share price went higher than expected, we stopped,'' Sultan bin Sulayem said in an interview in Dubai yesterday. The stock is overvalued ``based on today's price,'' he said.

Dubai World agreed on Aug. 22 to purchase as many as 28.4 million shares in billionaire Kirk Kerkorian's MGM and 50 percent of the Las Vegas-based company's CityCenter hotel-and- casino project. The group sought to buy half the shares in a public tender at $84 each. By Sept. 18, MGM had closed below that price for the last time.

The shares rose above $90 in New York trading last month after Harry Curtis, an analyst at J.P. Morgan Securities Inc., said Dubai might raise its offer. The stock, which reached a record $99.75 on Oct. 9, gained 60 percent this year.

MGM fell 3 cents to $91.92 at 4 p.m. in New York Stock Exchange composite trading.

Kerkorian, the 90-year-old investor who opened the MGM Grand casino in 1981, owns 54 percent of MGM Mirage. He considered buying the CityCenter complex and MGM's Bellagio Hotel & Casino earlier this year, then dropped the plans after the company said in June that it would build another Las Vegas casino.

Market Value

MGM Mirage, valued on the stock market at $26.1 billion, owns 10 casinos, including the MGM Grand Las Vegas and Mandalay Bay, and 760 acres on the Las Vegas Strip.

``We can always buy in the market to achieve the 9 percent to 9.5 percent of MGM that we want,'' bin Sulayem said yesterday, declining to specify what Dubai World is willing to pay for MGM shares. ``There is no closing window'' for Dubai to invest, ``and we will look at it if the market gets better.''

MGM said Dubai holds 4.8 percent of its stock after buying 14.2 million shares from the company at $84 each.

Dubai's government is reducing reliance on the Gulf region's oil wealth by investing in businesses from clothing retailer Barneys New York to the Port of Dakar in Senegal through Dubai World.

The company plans to spend $11 billion dredging a waterway bigger than the Panama Canal through Dubai's desert interior and as much as $12 billion building homes near Bangalore, India.

Its DP World Ltd., which owns ports from the U.K. to China, plans to raise at least $3.5 billion in an initial share offering, bin Sulayem told reporters yesterday.

To contact the reporters on this story: Will McSheehy in Dubai at wmcsheehy@bloomberg.netGlen Carey in Dubai at gcarey8@bloomberg.net

Last Updated: October 22, 2007 16:40 EDT