Primadonna purchase on track for MGM

Thursday, Feb. 25, 1999 | 10:48 a.m.

CARSON CITY -- MGM Grand Inc., in the middle of a $570 million expansion at its Las Vegas Strip resort, gained preliminary approval from the Gaming Control Board Wednesday to take over Primadonna Resorts Inc.

The merger is to close Monday after the Nevada Gaming Commission gives its expected final approval today at its Carson City meeting. Several shareholders, however, have challenged the merger in lawsuits.

Primadonna said holders of 74 percent of its outstanding shares voted Tuesday to approve the merger. Primadonna said votes against the merger were cast by holders of only 0.6 percent of the outstanding shares.

The deal is valued at $590 million -- $358.6 million in stock and the assumption of $231.7 million of debt.

Under the transaction, three shares of Primadonna stock will be exchanged for one share of MGM Grand stock. This will put MGM in charge of the three casinos in Primm 35 miles south of Las Vegas and in full control of the New York-New York hotel-casino on the Strip. MGM and Primadonna have been in a joint venture at New York-New York.

When the deal is completed, Kirk Kerkorian and his Tracinda Corp. will own 61.8 percent of the MGM stock and Primadonna Chairman Gary Primm will hold 4.7 percent and will fill a new 13th seat on the MGM board of directors. The other members of the Primm family will hold 6.3 percent and the general public will have 27.2 percent.

MGM Chairman and Chief Executive Terrence Lanni told the board about its recently opened $92 million, 190,000-square-foot conference center. He said a Tuscan Villa addition with 29 suites for high rollers will be ready in April. The following month, he said, a new habitat for lions will be opened, with five to seven lions of the 20 owned by the company on display. In July, he said, a new parking garage will be completed.

"We are very committed to Nevada and we have put our money where our mouth is," Lanni said.

Board members questioned Lanni about the impact of Indian gambling in California on the casinos in Primm, which is on Interstate 15 at the California border. Lanni said MGM attorneys feel California's Proposition 5, which allows expanded Indian gambling, is unconstitutional and will be overturned by the courts.

Alex Yemenidjian, president of MGM Grand Inc., was asked about the MGM Grand's agreement with former heavyweight champion Mike Tyson, now in jail. Tyson has stock options in the hotel under his contract for future fights at the resort.

Yemenidjian said an agreement is being worked out with Tyson that would preclude him from owning the stock. The shares could go into a family trust or be sold immediately after Tyson acquires them.

These stock options are being held as collateral to ensure Tyson's future appearances at the MGM Grand.

Lanni also denied an allegation by a member of the South African Legislature that someone had paid a $414,000 bribe to help with MGM's licensing in that country.

A Control Board official said today that earlier this week, a member of a two-person minority party alleged on the floor of the South African parliament that someone had paid 1 million rand to the minister of finance to approve the Tonga Sun-MGM Grand joint venture's licence application.

In its investigation, the Control Board learned that parliament members have immunity from libel actions for statements they make while on the floor, but that the politician hasn't repeated the allegation since then.

The charge prompted the South African government to offer a 250,000 rand reward to anyone who can provide information substantiating the claim. So far, board official said, there has been no response.

Lanni said this was a typical political statement made during an election year in a country where candidates are immune from civil suits.

Yemenidjian told the board that construction of a temporary casino in an old IRS building in Detroit is under way and should be finished in late summer. MGM is one of three successful bidders for gaming in Detroit. With the approval of Michigan officials, the casino should open in the fall.

MGM also owns a casino in Darwin, Australia, and is operating manager of the club in South Africa.

The Sun's Gary Thompson contributed to this story.