Mirage Resorts shareholders sue to gain highest price for shares

Grace Leong

Thursday, Feb. 24, 2000 | 10:49 a.m.

Less than four hours after MGM Grand Inc. announced its $5.4 billion offer to buy Mirage Resorts Inc. on Wednesday, five Mirage shareholders filed class action lawsuits in an effort to get the highest possible price for their stock.

Attorneys for the plaintiffs say they filed the lawsuits against Mirage, Chairman and Chief Executive Steve Wynn and six board members in Clark County District Court as a preemptive strike to force the Mirage board to act in the best interests of shareholders by seriously considering the MGM offer and other potential offers and by taking other pro-shareholder actions.

The shareholders said Mirage may not give the offer and others a fair hearing because the board members are afraid they may lose their management grip should the company be sold.

"The financial community thinks Mirage will take entrenchment steps to keep the company, especially since Wynn owns a sizeable amount of Mirage stock. If the company is sold, then the present management is finished," said Roger Harwood, a New York attorney for Crandon Capital Partners, one of the plaintiffs.

"The MGM offer is just an opening number from (Kirk) Kerkorian ... We're just trying to get the best price and there should be more negotiations for a higher price. But we don't want to see the MGM offer evaporate either," he said.

Kerkorian is the billionaire who controls MGM Grand.

"Our experts have looked at what's publicly available on company records. But we haven't gotten into the internal records yet. Once we see what the prospects are for future growth, then we can set a fair range of values and we should be negotiating to get a higher price than what MGM has offered," Harwood said.

He declined to comment on how much the shareholders want for their investment.

Crandon alleged Mirage board members have breached their fiduciary duty to maximize shareholder value by wrongfully refusing to properly consider a bona fide offer-- one that represents a substantial premium over the market price -- for the company from MGM Grand.

Mirage, however, has not rejected MGM's offer. It said Wednesday the proposal will be considered by the board at a meeting to be held in the near future.

While the Crandon suit appears to support the proposed merger, the other four suits filed by Richard Ardezzone, Janis Zvokel, Naline Yassin and J.M.M. Management seek an order to block the merger from being consummated until the defendants have provided sufficient internal financial information about Mirage for the shareholders to cast informed votes on MGM's proposal.

"There's no contradiction here. All the suits have as their goal to maximize shareholder value and to get the directors to fulfill their fiduciary duties to the shareholders," said Mark Albright, the plaintiffs' attorney in Las Vegas.

Crandon's Harwood agreed. "The shareholders want more, and if it turns out (the MGM offer) isn't a fair price, then we would be looking to a rescision. But the main point is if the incumbent management doesn't negotiate, there won't be any chance of a higher price."

MGM Grand is offering $17 per share for Mirage Resorts, either all in cash or a combination of $7 per share in cash and $10 worth of MGM stock -- a bid worth about $3.28 billion. MGM would also assume Mirage Resort's $2.1 billion debt.

Crandon said the defendants owe "fundamental fiduciary obligations" to Mirage shareholders to protect their interests, conduct fair bidding procedures and to check the market to assure that the highest possible price is achieved.

The suit seeks an order to compel Mirage board members to consider all bona fide proposals, evaluate and enhance Mirage's worth as an acquisition candidate and take steps to expose Mirage to the marketplace to create an active auction of the company.

Crandon's suit also said Mirage directors must ensure that "no conflict of interest exists between the defendants' own interests and their fiduciary obligations to maximize shareholder value, or if such conflicts exists, to ensure that all such conflicts will be resolved in the best interests" of its shareholders.

Albright anticipates at least two more lawsuits will be filed today by other Mirage shareholders.