MGM Grand increases pressure on Wynn

David Strow

Monday, Feb. 28, 2000 | 11:03 a.m.

MGM Grand Inc. turned up the heat on Mirage Resorts Inc. today, reminding Mirage CEO Steve Wynn that he would have to achieve a share price "significantly higher than $17 per share" if he chose to reject MGM Grand's $5.4 billion offer for his company.

Speculation continued, in the meantime, that Wynn may be talking to Harrah's Entertainment about a possible deal after Barron's reported in this week's edition that Harrah's executives met with Wynn on Thursday.

Mirage spokesman Alan Feldman today said he was unaware of such a meeting. Park Place Entertainment Corp. is also said to be running numbers on a possible combination with Mirage.

Today's MGM Grand initiative came in a letter from MGM Grand Chairman J. Terrence Lanni to Wynn that MGM Grand issued publicly. Mirage Resorts' board is set to meet to consider MGM Grand's $17 per share offer and other alternatives within days; analysts say investment banking firm Goldman Sachs has been hired to help consider the offer and its alternatives.

"Again, we are convinced that a combined MGM Grand/Mirage entity would create stockholder value well beyond what Mirage Resorts can accomplish on its own," Lanni's letter said. "With respect to Mirage shareholders in particular, if your board of directors decides not to accept our offer and the stock price of Mirage does not equal or exceed our $17 per share offer price by the time our merger would have been completed, the price of Mirage's stock may need to rise significantly higher than $17 per share so that, on a percent value basis, it would provide at least the same return to Mirage shareholders."

Lanni added that uncertainty over financing could not be used as a reason for rejecting the MGM Grand bid.

"We want to clarify to you and your board of directors that our offer is not subject to financing, and that we have an unconditional financing commitment to fund the entire acquisition cost, including Mirage's existing indebtedness," Lanni wrote.

Analysts say the letter was addressed as much to investors as it was to Wynn, and was designed to raise the heat on him in advance of the board meeting. Wall Street expects that meeting to be held Tuesday, and many observers expect that Wynn and the Mirage Resorts board will not accept the offer, at least at the initial price.

"(MGM Grand is) talking to the investment community," said Dave Ehlers, chairman of Las Vegas Investment Advisors. "What they're saying to the investment community is that, in essence, you'd better watch out. Our $17 per share offer will look awful good later if you turn it down.

"If these are friends, you don't need many enemies."

Prior to MGM Grand's offer of Feb. 23, Mirage Resorts traded below $11 per share, near its 52-week low. Mirage shares rose 81 cents this morning to $15.81.

Analysts say MGM Grand President and Chief Financial Officer Jim Murren was in New York today meeting with analysts and large shareholders to discuss the potential transaction.

"They're trying to remind shareholders (with the letter) that they're (MGM Grand) for real," said Stuart Linde, gaming analyst with Lehman Bros. "MGM is looking for a transaction, and they (Mirage Resorts) need to do something. Kirk Kerkorian (MGM Grand's major shareholder) could write a check out for this company.

"It is clear that Mirage cannot just walk away. But it is also as clear $17 does not get it done."