It all started in early 1999, mere months after Steve Wynn opened Bellagio for billions, which Wall Street, Mirage Resorts Inc. shareholders, and pundits from coast to coast panned as too expensive, too gaudy, and too detrimental to the corporation’s bottom line. The price of Mirage stock started to drop.
It kept dropping, to the point where, in October 1999, billionaire financier Kirk Kerkorian bought up 9.8 million shares, nearly 5% of the company. The $140 million investment immediately prompted speculation that Kerkorian intended to launch a hostile takeover of MRI. At the time, a spokesman for Kerkorian described the purchase as "for investment purposes only."
Not quite.
Meanwhile, Wynn’s normally shiny star also seemed to fade with the stock price. A Dec. 13, 1999, Business Week article titled "Sour Notes for Steve Wynn" suggested that the Mirage Resorts Inc. chairman might be losing his golden touch.
Then, the Feb. 2, 2000, Wall Street Journal ran a story titled "Mississippi Gamble," which went into comprehensive detail about problems experienced by Mirage Resorts with its Beau Rivage Resort-Casino in Biloxi, which had opened a year earlier, in March 1999.
More negative press about Steve Wynn appeared in the Feb. 14 WSJ. The influential column, "Heard on the Street," charged that Wynn was unskilled at playing the Wall Street game, especially in dealing with analysts. The article cited a recent episode that gave rise to a lampoon that made the boardroom rounds, titled "The Bellagio Hillbilly."
Wynn must have really angered someone somehow, because a March 3 Wall Street Journal article titled "Bellagio: Where Luxury is a Crap Shoot," essentially condemned the Bellagio experience. The upshot: A place that big simply couldn’t provide a top-of-the-line hotel experience.
And then, in April 2000, the unthinkable happened: Kirk Kerkorian made Steve Wynn an offer he couldn’t refuse. It was a swift and essentially seamless transaction, but what was amazing about it was that Wynn actually went along with it.
Why?
Well, first, there was the little matter of the $500 million that Wynn reaped from the sale of his Mirage stock. But it almost had to be something deeper that moved him to sell. At the time, we believed that Wynn just got tired of the pounding he was taking -- from stockholders, Wall Street, the press, even his own casino customers. We still believe it.
In addition, we believed that Kerkorian, though he put a happy face on the takeover, had been waiting for just such an opportunity for about, oh, 35 years. It all harkened back to a deal from the ‘60s that we won’t go into here, but plenty of old-timers weren’t surprised that Kerkorian finally took his revenge. Still, he probably did Wynn a favor by buying him out of his problems.
Of course, the rest is history. Wynn went out and two months later bought the 50-year-old 200-acre Desert Inn for a mere $270 million in cash from Starwood Hotels & Resorts. He opened Wynn Las Vegas in April 2005, broke ground on Encore in April 2006, and intends to turn the old Desert Inn golf course into a metaresort.
Kerkorian, for his part, went on to buy up Mandalay Resort Group, and MGM Mirage Mandalay now owns most of the west side of the Strip, and some of the east.
Anyway, here’s how the MGM Mirage deal went down.
On Feb. 23, 2000, MGM Chairman Terry Lanni sent a "friendly" letter to Steve Wynn, offering $17 per share, or $5.4 billion, for MRI; the offer represented a 56% premium over MRI's share price of $10-7/8.
Mirage declined the offer and adopted a poison-pill defense against a hostile takeover. A frenzy of speculation ensued, including rumors that Harrah's would step forward as a white knight to acquire MRI. (Harrah’s didn’t; instead, the company bought up Caesars Entertainment and now owns most of the east side of the Strip, and some of the west.)
MGM upped the ante to $21 per share, or $6.4 billion. On March 6, MRI accepted the offer, stunning the casino world. A brief comment lauding the deal was the extent of the reaction from Steve Wynn. Until, that is, he conducted a meeting with about 900 of his executives and managers to discuss the acquisition. Sources said Wynn expressed neither anger nor disappointment at the result: "If Picasso were alive today and he were to visit the Prado Museum, and he were to see one of his masterworks on the wall, he wouldn’t be upset he didn't own it. He would be proud it was on display for the public to enjoy. For me, it's never been about owning hotels. I derive my passion by designing and building them. No matter what I do, I'll always be around to enjoy the hotels we built together."
