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Deal Struck as MGM Grand Ups Bid for Mirage in Vegas

March 07, 2000|JAMES F. PELTZ | TIMES STAFF WRITER

Kirk Kerkorian, the 82-year-old billionaire and brash deal maker who controls MGM Grand Inc., would become the unrivaled kingpin of Las Vegas gaming under an agreement Monday for MGM Grand to buy Mirage Resorts Inc. for $4.4 billion in cash.

The deal would give Kerkorian and MGM Grand control of more than 18,000 rooms up and down the Las Vegas Strip at such famed hotel-casinos as MGM Grand, Mirage, Bellagio, New York-New York and Treasure Island, among others.

The pact also abruptly ended what many expected would become a hostile takeover battle between Kerkorian and Steve Wynn, the flamboyant Mirage chairman who is arguably the other most powerful figure in Las Vegas. But once the deal is completed, Wynn is not likely stay at the new company.

The proposed merger would solidify MGM Grand's role as the top attraction for Las Vegas' highest-rolling gamblers, observers said.

"It's a casino powerhouse with growth prospects second to none," said Jason Ader, an analyst with investment firm Bear, Stearns & Co. in New York.

Otherwise, the merger is not expected to alter the landscape in Las Vegas, where more than 33 million gamblers and tourists visit each year. Unlike so many corporate combinations, in which excess factories and offices are closed and employees are laid off to cut costs and boost profits, none of the 14 hotel-casinos that would be owned by MGM are expected to be shuttered.

"We look at this [merger] as a great opportunity to grow the company," said MGM Grand Chairman J. Terrence Lanni, who added that layoffs are expected to be minimal. Noting that MGM Grand also would get Mirage's 55 acres of undeveloped land along the Strip, Lanni said in a telephone interview, "It's not a matter of consolidation and cutting back; it's not a matter of reducing people."

Kerkorian and the Art of the Deal

The MGM Grand-Mirage pact writes another chapter in the intriguing story of the enigmatic Kerkorian, a junior high school dropout who grew up dirt poor in the San Joaquin Valley.

Kerkorian made it rich first in Hollywood by acquiring the Metro-Goldwyn-Mayer studio (which he eventually broke apart), and later by purchasing Las Vegas casinos and making takeover runs at other companies, including Chrysler Corp. in 1995.

Though not reclusive, Kerkorian is known as being unpretentious and simply shy, despite a net worth estimated at $7 billion. But he is also known as a cunning deal maker who loves going after big corporate prey.

"It doesn't surprise me in the slightest" that Kerkorian is still doing deals at his age, said Patricia Glaser, a lawyer for Kerkorian. "He's full of ideas and full of energy and a very creative guy."

The same attributes are ascribed to Wynn, who "did help bring a lot of respectability" to Las Vegas at a time when "Sin City" was putting behind its checkered past, which included the doings of eccentric Howard Hughes, gangster Bugsy Siegel and various organized crime figures, said Anthony Curtis, publisher of the consumer newsletter Las Vegas Advisor.

But Wynn's greatest legacy is that he spawned today's huge resorts, which include stores, restaurants, theme parks and other assets that serve the non-gambler. In doing so, he helped create a surge in Las Vegas attendance. "He made it the non-gambler's spouse-friendly Las Vegas," Curtis said.

MGM Grand first approached Mirage about a friendly deal two weeks ago. But the overture set off speculation that Wynn would mount a ferocious defense.

But he didn't. After Wynn and the rest of Mirage's board of directors rejected MGM Grand's initial offer of $17 a share as too low, Kerkorian and MGM Grand sweetened the deal to $21 a share and Mirage accepted.

And in doing so, Wynn set in motion plans to leave Mirage when the deal is completed, probably by year's end. Wynn, 58, neither was offered nor asked for a job with MGM Grand. But he did not have to sign a "non-compete" clause, which means he is free to join another gaming operator once the MGM Grand-Mirage merger is completed--if he so chooses.

Wynn had been under pressure to accept Kerkorian's offer because Mirage's stock had been plummeting before Kerkorian stepped forward with his offer. Mirage's performance was faltering in good part because of heavy spending on the $1.6-billion Bellagio and another opulent resort, Beau Rivage, in Mississippi.

Even so, Wynn's alacrity in accepting Kerkorian's higher offer surprised many.

"I would have thought there would have been another bidder, or that [Wynn] would have tried to figure out some way to increase the value of Mirage's stock while keeping control," said Dennis Forst, an analyst at McDonald & Co. Securities in Los Angeles.

Wynn to Walk Away a Winner

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