Fascinating article in the WSJ on how the big boys roll. I cannot link it because I'm a subscriber
How Kerkorian Won Wynn's Mirage
Bear-Hug Letter, Precision-Trained Guard Dogs and Coconut Sorbet All Played a Role
By CHRISTINA BINKLEY WSJ
March 5, 2008; Page B1
On 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,' Mr. Wynn says of the analysts who follow Mirage. 'They were dumber than I thought.' "
Excerpted from a new book by Christina Binkley, a columnist at The Wall Street Journal: "Winner Takes All: Steve Wynn, Kirk Kerkorian, Gary Loveman, and the Race to Own Las Vegas." 2008, Christina Binkley. Published by Hyperion.
Mr. Wynn was frustrated with critics of his lavish spending. A casino visionary who is slowly going blind, he is largely responsible for the modern, luxurious tourist mecca that Sin City 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, Miss., casino -- was worrying Wall Street that year: Mirage's stock had plummeted from around $25 a share to a low of $10.625.
Mr. Kerkorian, the octogenarian investor who controlled MGM Grand Inc., believed his rival's comments revealed vulnerability. He located his lawyer, Gary Jacobs, on vacation in Aurangabad, India, and raised a subject that he had dreamed about for years: a takeover of Mirage.
"The stars were aligned perfectly," says a person who was involved.
Mr. Jacobs suggested sending Mr. Wynn a bear-hug letter -- so-called because its grip is suffocating. Mr. 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 LLC. Mr. Barrack, a friend of Mr. Trump, never publicized the offer or put it in writing. That was friendly.
Releasing a letter publicly wouldn't be so friendly. It would force Mr. Wynn to come up with a plan to create as much value for shareholders as Mr. Kerkorian's offer or face years of lawsuits.
After a week of strategizing, Mr. Kerkorian called Mr. Wynn at home. This is the way Mr. 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 Mr. Kerkorian mentioned his price: $17 a share.
Mr. Wynn laughed. He says Mr. Kerkorian agreed that the price was low.
* * *
After the call was over, Mr. 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. Mr. Kerkorian's team also put it out over the newswires and notified the Securities and Exchange Commission. This public move had one aim -- to force Mr. Wynn's hand, Mr. Jacobs says.
Smelling a high-profile takeover battle, several Goldman Sachs Group Inc. bankers, including one named Dino Fusco, flew to Las Vegas that morning, proposing to represent Mirage. When he heard the amount of their fee, Mr. Wynn asked that the bankers be ushered into his office.
"Let me get this straight," Mr. Wynn shouted, his face reddening. "Just so I understand. So I get a letter from Kirk Kerkorian. So far, he's spent 33 cents. And you want to charge me $25 million to respond?"
Mr. Wynn's ranting excited his precision-trained guard dogs. Perceiving a threat to their master, the German shepherds commenced to case the room for danger. One dog shoved his nose into Mr. Fusco's crotch in an attack position. The dog stayed that way, staring at the investment banker, for the full length of Wynn's tirade. "I was petrified," Fusco recalls. "I'm thinking, 'This job isn't worth this.' "
Mr. Wynn's tantrum proved to be worth $10 million. Goldman reduced its fee to $15 million.
At a Mirage board meeting on Feb. 29, the directors gave Mr. Wynn and his top executives lucrative new employment terms. These contracts seemed to obsess Mr. 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, Messrs. Wynn and Kerkorian agreed to meet privately at Bellagio to discuss price. Mr. Kerkorian arrived through Mr. Wynn's private backdoor. Mr. Wynn admired the way Mr. Kerkorian looked in his powder-blue slacks and a cream-and-blue checked sport coat. "He looked like a model," Mr. Wynn says.
The two moguls sat on chairs in an alcove of Mr. Wynn's office. Knowing his rival was deaf in one ear, Mr. Wynn took care to sit on the side of Mr. Kerkorian's good ear. He ordered them each a cup of coconut sorbet from a shop in the casino. "I only want a little bit, Stevie," Mr. Kerkorian said.
Mr. Murren had told Mr. Kerkorian that Mirage Resorts was worth as much as $22 or $23 a share to MGM Grand. But Mr. Kerkorian didn't let on. He told Mr. Wynn he could go as high as $19. When Mr. Wynn said he wanted $21, Mr. Kerkorian grimaced.
Mr. Wynn says he also informed Mr. Kerkorian that he intended to start work on a new casino almost immediately and that he wanted to put out the press release announcing the deal -- an honor normally accorded the acquirer. Nonetheless, Mr. Kerkorian reached his hand across to Mr. Wynn, and they shook on it.
"He was like 18 years old again," Mr. Wynn says. "He started eating his sorbet real fast."
When Mr. Kerkorian returned to the MGM Grand executive offices, "I don't think his feet were on the ground," says Mr. Murren. "You could imagine him with a pair of boxing shorts on."
Mr. Kerkorian was electric. He stood up. He slammed his hand on the table. "This is the opportunity of a lifetime, gentlemen!" he announced.
As Mr. Kerkorian's team drew up legal papers, an MGM attorney suggested barring Mr. Wynn from opening another casino for a period of time. "Absolutely not," Mr. 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 27th and final annual meeting of Mirage Resorts, a shareholder asked Mr. 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," Mr. Wynn answered. "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," he added. "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. Several Goldman bankers joked that "of course" they did the deal at $21 a share. It's Las Vegas. Blackjack.
And MGM Grand got stuck with the $15 million Goldman Sachs bill, though Mr. Murren, who had done Mr. 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 a hostile because of that letter," he says during a full-out rant in his office. The bear-hug letter was a "mistake" on Mr. Kerkorian's part, he adds. It was a move of naïveté, not cunning.
"I don't think that Kirk understood what that letter meant," says Mr. Wynn. "Cause when I said I'd have to take it to my board, he said, 'Oh.' And it was a real 'Oh!' "
"So Kirk supposedly didn't understand what he was doing?" says Jim Murren. "That's such a crock."
Hostile. Friendly. Call it what you like. Mr. Wynn's eggs were moved to Mr. Kerkorian's nest.
How Kerkorian Won Wynn's Mirage
Bear-Hug Letter, Precision-Trained Guard Dogs and Coconut Sorbet All Played a Role
By CHRISTINA BINKLEY WSJ
March 5, 2008; Page B1
On 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,' Mr. Wynn says of the analysts who follow Mirage. 'They were dumber than I thought.' "
Excerpted from a new book by Christina Binkley, a columnist at The Wall Street Journal: "Winner Takes All: Steve Wynn, Kirk Kerkorian, Gary Loveman, and the Race to Own Las Vegas." 2008, Christina Binkley. Published by Hyperion.
Mr. Wynn was frustrated with critics of his lavish spending. A casino visionary who is slowly going blind, he is largely responsible for the modern, luxurious tourist mecca that Sin City 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, Miss., casino -- was worrying Wall Street that year: Mirage's stock had plummeted from around $25 a share to a low of $10.625.
Mr. Kerkorian, the octogenarian investor who controlled MGM Grand Inc., believed his rival's comments revealed vulnerability. He located his lawyer, Gary Jacobs, on vacation in Aurangabad, India, and raised a subject that he had dreamed about for years: a takeover of Mirage.
"The stars were aligned perfectly," says a person who was involved.
Mr. Jacobs suggested sending Mr. Wynn a bear-hug letter -- so-called because its grip is suffocating. Mr. 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 LLC. Mr. Barrack, a friend of Mr. Trump, never publicized the offer or put it in writing. That was friendly.
Releasing a letter publicly wouldn't be so friendly. It would force Mr. Wynn to come up with a plan to create as much value for shareholders as Mr. Kerkorian's offer or face years of lawsuits.
After a week of strategizing, Mr. Kerkorian called Mr. Wynn at home. This is the way Mr. 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 Mr. Kerkorian mentioned his price: $17 a share.
Mr. Wynn laughed. He says Mr. Kerkorian agreed that the price was low.
* * *
After the call was over, Mr. 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. Mr. Kerkorian's team also put it out over the newswires and notified the Securities and Exchange Commission. This public move had one aim -- to force Mr. Wynn's hand, Mr. Jacobs says.
Smelling a high-profile takeover battle, several Goldman Sachs Group Inc. bankers, including one named Dino Fusco, flew to Las Vegas that morning, proposing to represent Mirage. When he heard the amount of their fee, Mr. Wynn asked that the bankers be ushered into his office.
"Let me get this straight," Mr. Wynn shouted, his face reddening. "Just so I understand. So I get a letter from Kirk Kerkorian. So far, he's spent 33 cents. And you want to charge me $25 million to respond?"
Mr. Wynn's ranting excited his precision-trained guard dogs. Perceiving a threat to their master, the German shepherds commenced to case the room for danger. One dog shoved his nose into Mr. Fusco's crotch in an attack position. The dog stayed that way, staring at the investment banker, for the full length of Wynn's tirade. "I was petrified," Fusco recalls. "I'm thinking, 'This job isn't worth this.' "
Mr. Wynn's tantrum proved to be worth $10 million. Goldman reduced its fee to $15 million.
At a Mirage board meeting on Feb. 29, the directors gave Mr. Wynn and his top executives lucrative new employment terms. These contracts seemed to obsess Mr. 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, Messrs. Wynn and Kerkorian agreed to meet privately at Bellagio to discuss price. Mr. Kerkorian arrived through Mr. Wynn's private backdoor. Mr. Wynn admired the way Mr. Kerkorian looked in his powder-blue slacks and a cream-and-blue checked sport coat. "He looked like a model," Mr. Wynn says.
The two moguls sat on chairs in an alcove of Mr. Wynn's office. Knowing his rival was deaf in one ear, Mr. Wynn took care to sit on the side of Mr. Kerkorian's good ear. He ordered them each a cup of coconut sorbet from a shop in the casino. "I only want a little bit, Stevie," Mr. Kerkorian said.
Mr. Murren had told Mr. Kerkorian that Mirage Resorts was worth as much as $22 or $23 a share to MGM Grand. But Mr. Kerkorian didn't let on. He told Mr. Wynn he could go as high as $19. When Mr. Wynn said he wanted $21, Mr. Kerkorian grimaced.
Mr. Wynn says he also informed Mr. Kerkorian that he intended to start work on a new casino almost immediately and that he wanted to put out the press release announcing the deal -- an honor normally accorded the acquirer. Nonetheless, Mr. Kerkorian reached his hand across to Mr. Wynn, and they shook on it.
"He was like 18 years old again," Mr. Wynn says. "He started eating his sorbet real fast."
When Mr. Kerkorian returned to the MGM Grand executive offices, "I don't think his feet were on the ground," says Mr. Murren. "You could imagine him with a pair of boxing shorts on."
Mr. Kerkorian was electric. He stood up. He slammed his hand on the table. "This is the opportunity of a lifetime, gentlemen!" he announced.
As Mr. Kerkorian's team drew up legal papers, an MGM attorney suggested barring Mr. Wynn from opening another casino for a period of time. "Absolutely not," Mr. 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 27th and final annual meeting of Mirage Resorts, a shareholder asked Mr. 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," Mr. Wynn answered. "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," he added. "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. Several Goldman bankers joked that "of course" they did the deal at $21 a share. It's Las Vegas. Blackjack.
And MGM Grand got stuck with the $15 million Goldman Sachs bill, though Mr. Murren, who had done Mr. 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 a hostile because of that letter," he says during a full-out rant in his office. The bear-hug letter was a "mistake" on Mr. Kerkorian's part, he adds. It was a move of naïveté, not cunning.
"I don't think that Kirk understood what that letter meant," says Mr. Wynn. "Cause when I said I'd have to take it to my board, he said, 'Oh.' And it was a real 'Oh!' "
"So Kirk supposedly didn't understand what he was doing?" says Jim Murren. "That's such a crock."
Hostile. Friendly. Call it what you like. Mr. Wynn's eggs were moved to Mr. Kerkorian's nest.
