Question of the Day - 11 May 2022

In 1999 and early 2000, Steve Wynn was attempting something he'd never done before or after: trying to build two megaresorts simultaneously. Bellagio launched quite successfully in Las Vegas, but Beau Rivage in Biloxi got off to a rocky start. Combined with other factors, not the least of which was investor anger toward what some view as Wynn's arrogant attitude toward analysts and shareholders, Mirage Resorts' share price dropped from $26 in May 1999 to under $11 by the following February.

Meanwhile, the stage was being set for an MGM buyout. In September 1999, Kirk Kerkorian bought a stake in Mirage, then trading in the low teens. Of course, Kerkorian didn't make a move like that without a lot of people noticing. Although he bought less than 5% of Mirage stock for what he called "investment purposes only," with the stock languishing, Kerkorian's intentions weren't exactly opaque. 

For his part, while Wynn characterized the transaction as amicable (he and Kerkorian were tennis partners), he also insisted he'd thwart any takeover of the company. 

Kerkorian's initial flier into Mirage stock was short-lived. Saying he'd been made to feel "very unwelcome" at Wynn's company, Kerkorian sold his position in November, but not before making a cool $20 million profit on the transaction. The mercurial billionaire had also offered Wynn an opportunity to buy MGM Grand on two occasions following the opening of Bellagio, but Wynn demurred.

Then, on Feb. 23, 2000, Kerkorian offered Wynn a package of $3.25 billion in cash and stock compensation and the assumption of $2 billion of Mirage debt. Mirage shares immediately leapt from their doldrums.

MGM initially offered $17 per share for Mirage, but the Wynn board peremptorily rejected that offer, countering with 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, 2000, the two companies announced that they’d become one, temporarily putting Wynn out of a job.

Of course, he didn't stay idle for long. Barely seven weeks later, Wynn bought the Desert Inn from Starwood Resorts for $270 million. The deal on August 28 and Wynn now had 200 acres (the DI proper and its golf course) to develop. 

As for why Wynn sold, basically, Kerkorian made him an offer he couldn't refuse.