How an oc­to­ge­nar­ian beat the casino king

The Weekend Australian - Review - - Primespace - Christina Bink­ley

ON St Valen­tine’s Day in 2000, bil­lion­aire Kirk Kerko­rian opened his news­pa­per and smelled blood. A col­umn in The Wall Street Jour­nal be­gan like this:

When Steve Wynn, chair­man and chief ex­ec­u­tive of­fi­cer of Mi­rage Re­sorts, held his first in­vestor con­fer­ence call in July, it went badly. I was sur­prised,’ Wynn says of the an­a­lysts who fol­low Mi­rage. They were dumber than I thought’.’’

Wynn was frus­trated with crit­ics of his lav­ish spend­ing. A casino vi­sion­ary, he is largely re­spon­si­ble for the mod­ern, lux­u­ri­ous tourist mecca that Las Ve­gas has be­come since he built the Mi­rage casino in 1989.

Of­ten called the King of Ve­gas, he had re­cently spent tens of mil­lions of dol­lars buy­ing im­pres­sion­ist art for his latest cre­ation at the time, Bel­la­gio. But his spend­ing — along with trou­bles at a Biloxi casino in Mis­sis­sippi — was wor­ry­ing Wall Street that year: Mi­rage’s stock had plum­meted from about $ 25 a share to a low of $ 10.625.

Kerko­rian, the oc­to­ge­nar­ian in­vestor who con­trolled MGM Grand, be­lieved his ri­val’s com­ments re­vealed vul­ner­a­bil­ity. He lo­cated his lawyer, Gary Ja­cobs, and raised a sub­ject that he had dreamed about for years: a takeover of Mi­rage.

Ja­cobs sug­gested send­ing Wynn a bear- hug let­ter — so- called be­cause its grip is suf­fo­cat­ing. Wynn would re­ceive a po­lite let­ter, signed by MGM Grand’s chair­man, Terry Lanni, of­fer­ing to buy Mi­rage Re­sorts for $ 17 a share, and the let­ter would be re­leased pub­licly.

Don­ald Trump once ig­nored a ver­bal of­fer for his trou­bled casino com­pany from Tom Bar­rack, chair­man of Colony Cap­i­tal. Bar­rack, a friend of Trump, never pub­li­cised the of­fer or put it in writ­ing. That was friendly.

Re­leas­ing a let­ter pub­licly wouldn’t be so friendly. It would force Wynn to come up with a plan to cre­ate as much value for share­hold­ers as Kerko­rian’s of­fer or face years of law­suits.

Af­ter a week of strate­gis­ing, Kerko­rian called Wynn. This is the way Wynn de­scribes their con­ver­sa­tion:

Kerko­rian: I got a new idea. How about if I buy Mi­rage — the whole thing — for stock, cash, any­thing?’’ Wynn: Are you kid­ding?’’ Kerko­rian: If you don’t want to do it, I’ll for­get about it. I wanna send you a let­ter.’’

Wynn: If you send me a let­ter, I have to re­spond through the board.’’

Kerko­rian: Oh. Well, Terry sent a let­ter. I didn’t want to, but he did it.’’

Then Kerko­rian men­tioned his price: $ 17 a share.

Wynn laughed. He says Kerko­rian agreed that the price was low.

Af­ter the call was over, Wynn told his wife, Elaine, about it.

What do you want to do?’’ she says she asked. He re­sponded, I want to sell.’’

The let­ter ar­rived the next day. Kerko­rian’s team also put it out over the newswires and no­ti­fied the Se­curi- ties and Ex­change Com­mis­sion. This pub­lic move had one aim — to force Wynn’s hand, Ja­cobs says.

Smelling a high- profile takeover bat­tle, sev­eral Gold­man Sachs Group bankers flew to Las Ve­gas that morn­ing, propos­ing to rep­re­sent Mi­rage. When he heard the amount of their fee, Wynn asked that the bankers be ush­ered into his of­fice.

Let me get this straight,’’ Wynn shouted. Just so I un­der­stand. So I get a let­ter from Kirk Kerko­rian. So far, he’s spent 33c. And you want to charge me $ 25 mil­lion to re­spond?’’ Wynn’s tantrum proved to be worth $ 10 mil­lion. Gold­man re­duced its fee to $ 15 mil­lion.

At a Mi­rage board meet­ing on Fe­bru­ary 29, the direc­tors gave Wynn and his top ex­ec­u­tives lu­cra­tive new em­ploy­ment terms.

Th­ese con­tracts seemed to ob­sess Wynn, in par­tic­u­lar their ef­fect on his Las Ve­gas home at Shadow Creek, the art that he had col­lected, and the com­pany’s New York apart­ment and Gulf­stream III jet, ac­cord­ing to sev­eral peo­ple at MGM Grand who learned de­tails of the board’s dis­cus­sions dur­ing sub­se­quent ne­go­ti­a­tions.

More time was spent on that than some of the sub­stan­tive cor­po­rate is­sues,’’ says Jim Mur­ren, then MGM’s pres­i­dent and chief fi­nan­cial of­fi­cer.

Soon af­ter­ward, Wynn and Kerko­rian agreed to meet pri­vately at Bel­la­gio to dis­cuss price. Mur­ren had told Kerko­rian that Mi­rage Re­sorts was worth $ 22 or $ 23 a share to MGM Grand. But Kerko­rian didn’t let on. He told Wynn he could go as high as $ 19. When Wynn said he wanted $ 21, Kerko­rian gri­maced.

Wynn says he also in­formed Kerko­rian that he in­tended to start work on a new casino al­most im­me­di­ately.

Kerko­rian reached his hand across to Wynn, and they shook on it.

When Kerko­rian re­turned to the MGM Grand ex­ec­u­tive of­fices, he was elec­tric. This is the op­por­tu­nity of a life­time, gen­tle­men!’’ he an­nounced.

As Kerko­rian’s team drew up le­gal pa­pers, an MGM at­tor­ney sug­gested bar­ring Wynn from open­ing an­other casino for a pe­riod of time. Ab­so­lutely not,’’ Kerko­rian re­sponded, ac­cord­ing to a wit­ness. The best thing that could hap­pen to us is that Steve comes back and builds a place across the street.’’

When the $ 6.4 bil­lion deal was an­nounced, head­lines from Ja­pan’s Yomi­uri Shim­bum to the Wash­ing­ton Post her­alded the end of an era. The Lon­don In­de­pen­dent an­nounced: The King Is Dead.’’ Weeks later, at the fi­nal an­nual meet­ing of Mi­rage Re­sorts, a share­holder asked Wynn if there had been an al­ter­na­tive to sell­ing. As much as I’d have loved to buy back the com­pany my­self or buy a big­ger share of it, it’s not that easy to do,’’ Wynn said. So I found my­self a bit trapped.’’

Then he hinted at the truth: that he was al­ready draw­ing up plans for his own come­back. I’m very up­beat about what comes next,’’ he said.

But I don’t think I’m go­ing to be a pub­lic- mar­kets man. How can we ever cater to a 60- day time frame for in­vestors when we’re build­ing re­sorts for the ages?’’

The clos­ing din­ner for Mi­rage — an event at which cor­po­rate ex­ec­u­tives and bankers con­grat­u­late them­selves on a deal — was fes­tive.

MGM Grand got stuck with the $ 15 mil­lion Gold­man Sachs bill, though Mur­ren, who had done Kerko­rian’s bank­ing work him­self, called the fee high­way rob­bery’’. So, was it friendly or un­friendly? This is a ques­tion of great im­por­tance to Steve Wynn even af­ter he has built his gam­bling king­dom anew.

His an­swer: he wanted to sell Mi­rage Re­sorts. ‘‘ Peo­ple thought it was hos­tile be­cause of that let­ter,’’ he says. The bear- hug let­ter was a ‘‘ mis­take’’ on Kerko­rian’s part, he adds. It was a move of naivete, not cun­ning.

Hos­tile. Friendly. Call it what you like. Wynn’s eggs were moved to Kerko­rian’s nest. Ex­cerpt from a new book by The Wall Street Jour­nal colum­nist Christina Bink­ley: Win­ner Takes All: Steve Wynn, Kirk Kerko­rian, Gary Love­man, and the Race to Own Las Ve­gas , 2008, Christina Bink­ley. Pub­lished by Hype­r­ion.

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