[Yesterday, we left off with Mirage Resorts stock selling at a depressed $11 per share, Kirk Kerkorian buying and selling and selling 5% of Mirage stock at at $20 million profit and then, a few months later, making a bid for the whole company.]
MGM put on the table a package that would assume $2 billion of Mirage debt and include more than $3.25 billion in cash and stock compensation. Mirage shares immediately leapt from their doldrums.
The offer may have even offered relief to Wynn, who chafed at having to answer to the stock market. "I realized that I was a passenger on a train and subject to forces that were irrational," he told the Las Vegas Sun.
MGM initially offered $17 per share for Mirage, but the Wynn board peremptorily rejected that offer. However, when stock is trading below $11/share, it can hardly be easy to reject a white knight offering to take those shares off your hands at a handsome premium.
"There was only one guy willing to pay more than $6 billion for a gaming company and this was the guy," Wynn said. "We did not want Kirk Kerkorian to go away. I may be a better developer than Kirk Kerkorian, but I’m not a better deal-maker. If I go nose to nose with Kirk Kerkorian, I lose."
While MGM told investment analysts "point-blank" that it wouldn’t pursue a hostile takeover of Mirage, other potential suitors were either heavily leveraged or simply not willing to get in a bidding war with Kerkorian.
If selling Mirage Resorts was a bitter pill for Wynn to swallow, MGM sweetened it by purchasing Mirage at 9.6 times cash flow -- well above the industry average of 7X. What happened was Mirage sent CFO Bobby Baldwin to MGM, requesting a $21-per-share buyout.
Kerkorian went for it.
For its money, MGM got a quarter of the hotel rooms on the Las Vegas market and an estimated half of the high-roller market.
Wynn found himself $500 million richer in return for his 23.9 million Mirage shares.
On March 6, the two companies announced that they’d become one, temporarily putting Wynn out of a job.
"The business of developing is so intoxicating that it’s hard to imagine he’s gone forever," Ader said of Wynn at the time, accurately predicting that the casino magnate would acquire the Desert Inn. Wynn bought the resort on May 17, 2000, as a present for then-wife Elaine, ran it briefly, then tore it down to make room for Wynn Las Vegas, a reinvention so successful that it has almost eclipsed Wynn’s Mirage Resorts years.
"If the Bellagio is the same hotel and it’s now worth $2.6 billion instead of the $1.6 billion it cost to build," Wynn told an investment conference, I thought, ’Damn, I’ve got to go get me another piece of property."
So was Steve Wynn taken over or did he choose to sell? We’d say he didn’t have much choice but to sell. The handwriting of the deal was on the wall and, when it came to maximizing shareholder value, there was more to be gained by being absorbed into MGM Grand than by trying to keep going it alone. Besides, how do you tell a shareholder who’s holding stock worth $11/share that you just turned down $17?
Whether or not Steve Wynn wanted to sell Mirage Resorts (and only he knows, although he says he told Elaine he would "for the right price"), he did what was best for all concerned.
As for MGM, it became MGM Mirage and eventually MGM Resorts International. It still thinks highly of its Steve Wynn-built properties, having sold only one of them (Treasure Island) during a cash crunch. The others are theoretically for sale, but at such prohibitive rates that you can be sure MGM wants to keep them in the family.
Our conclusion: Mirage Resorts wasn’t taken over, but Steve Wynn knew the tactful moment to fall upon his sword.
