Wynn tells all about Desert Inn deal, his future

Sunday, July 2, 2000 | 10:33 a.m.

Desert Inn owner Steve Wynn recently sat down for a nearly two-hour interview with me and Paula Francis of KLAS-TV Channel 8. It was the first interview he has granted since his company, Mirage Resorts, was acquired by MGM Grand and since he purchased the Desert Inn.

He talked about a variety of topics, from how the agreement was rapidly consummated between him and Kirk Kerkorian, how serendipity smiled on him in the purchase of the DI and how he feels about a panoply of political and gaming issues.

Following are portions of the interview, broken down by topics. Explanations of those topics are followed by excerpts from the transcript of the interview, some of which is still airing on KLAS and Las Vegas ONE.

How the deal happened

Wynn said Kerkorian called him at home one night in February and told him that Kerkorian was sending a letter making an offer on the company. Wynn told his wife, Elaine, who did not think Wynn would sell. "Would you?" she asked. "For the right price," Wynn said.

Wynn knew he would never take Kerkorian's offer of $17 a share. He controlled the Mirage Resorts board of directors, which rejected the offer on Feb. 28. He met with Kerkorian the next day in his office:

Steve Wynn: Kirk and friends of Kirk had twice asked me if I wanted to merge ... I never thought to ask if Kirk wanted to buy it ... for north of $6 billion. How many people would want to buy a gaming company (for that price?).

I was just getting ready to buy stock for myself when Kirk bought it. The lesson I learned is that I should own more of the company. (Wynn owned 14 percent of Mirage Resorts; Kerkorian owned just under two-thirds of MGM Grand) ... I realized that I was a passenger on a train and subject to forces (Wall Street) that were irrational.

I asked Kirk in my office, I said, "Look, this is not a question of noncompete. You can't have a noncompete. But you're financing me."

He said, "You're overdue, go for it, and I know where you're going (the Desert Inn). Don't pay too much. I want you as a neighbor."

Jon Ralston: How long did this whole thing take?

Wynn: An hour and a half ... We ate coconut sorbet. We talked about it, and I told him what the company was about, what its cash flows were, what it's making. He said, "We're disadvantaged, all we got is analysts' reports, and they're all over the place, they're inaccurate." I said, "Here's the numbers."

He said: "Will your guys show it to my guys tomorrow?"

I said: "Let's do it at 10 o'clock in the morning."

We made a deal, Kirk and I, that I would give him a number and he was the only guy I was ever going to give the number to. I wasn't interested in merging or doing anything like that. I didn't want anyone else's stock, I wanted cash. I said, "Look, if the stockholders can get a first-class price for this that's fair, I'll go for it. I want to start over again."

And I said, "Can you handle this?"

And he said: "Yes."

Ralston: He knew you were going to compete with him?

Wynn: I brought it up to him. We faced each other. He put his hand on my shoulder and said, "You're overdue."

Wynn told Kerkorian he had two conditions:

Wynn: The first condition is no counteroffer, it's either yes or no, up or down, I'll give you a number. If you counter, we'll never talk about it anymore, ever again, about this company.

The second condition is that (if there's no deal) we issue a joint press release, say we've met and discussed at great length the possibility of merging the two companies. We didn't see it working, we'll continue independently, permanently, continue as neighbors, working on industry problems."

He stuck his hand out and said, "You got my hand on it."

And then I said: "$21." (As in $21 a share, up from the $17 offer the Mirage Resorts board had rejected the previous day).

Ralston: Did he agree right away?

Wynn: He said, "That's, uh...."

I said, "A billion two more than you offered." ($6.7 billion, up from the $5.5 billion rejected offer.)

Wynn later said the "moment of truth" in that 90-minute meeting was when he realized Kerkorian would put in his own money to make up the difference between the two offers, if necessary. The next day, executives from the two companies met to discuss details. One day later, March 3, the deal was consummated; it was made public March 6.

How Wynn got the DI

Wynn said the Desert Inn had been for sale ever since Moe Dalitz owned it three decades ago. When Sun International boss Sol Kerzner, a Wynn friend, announced on May 17 that he was buying the property for $275 million from Starwood, he was staying at Bellagio. The next day, Kerzner breakfasted with Wynn.

Wynn: He was so excited, I got excited. We started talking about how to position the buildings. We were designing at breakfast on the back of a placemat. He had a delay, he had to get licensed ... During that gap his stock went down with all the rest ... when Sol decided to (take Sun International) private, he didn't have enough money to develop the Desert Inn site. (When Kerzner pulled out of the deal), it was like God had intervened. Sol got out three weeks before Kirk decided that he had fallen in love with Mirage Resorts.

It's almost uncanny when you think about how your life will change in a short period of time. If you had told me on Washington's birthday in February that by the Fourth of July that I would have left the company I had built, sold it for $6.7 billion and that the Desert Inn would have been available for a million and half (dollars) an acre, I would have laughed in your face, I wouldn't have believed it could happen. ... I thought Bellagio was going to be the last hotel in Las Vegas.

Developing the property

Wynn will close the hotel by Labor Day and then begin razing buildings. Why knock it down?

Wynn: I can't protect the employees from the lamination of mistakes that have been made since 35 years ago when Moe Dalitz sold this place. ... It seems that every time one of the owners stepped up to fix it, they lost their focus, did every thing but the right thing. ... Nothing at the Desert Inn has been the way it should be.

When we came, it was judgment day. We wanted so much to keep the old hotel open as a training center until the new hotel was finished, but it's going to lose 30 to 40 thousand dollars a day.

Wynn believes the property will have a seven-year build-out, with as many as four hotels, the first one completed in about three years.

The second hotel will be adjacent to the first, much like Bally's and Paris. Another resort is planned for Paradise Road at the back of the 218 acres, to take advantage of its proximity to the convention center.

Wynn also believes that the development on the DI site will cause a "shift in the center of gravity from where it's been" and that the resort will naturally have walk-in traffic because of "a little, old pirate gimmick" at Treasure Island, which is 50 feet away from his property line and draws thousands of gawkers a day. As for the first hotel:

Wynn: Most importantly, we're going to rely very heavily on courtyards and gardens. ... This hotel will be a place when you move through it your eyes will be drawn to the rather cool, lush landscaping that will always be in view. ... All 10 restaurants in the hotel will project into gardens. When you leave, you will be surrounded by lifescape, by living material, but still be in air-conditioned comfort.

All of the properties will be lakefront. ... We're going to create a water stadium and have a variety of attractions that go from noon until midnight. This water stadium will be very modestly priced, 10, 12 bucks, 15, easy for everybody to afford. And you'll be able to come here twice a day. There will be stuff for daytime, stuff for evening. We'll rely on darkness and light and lasers and smoke.

What happened to Mirage?

Wynn publicly and repeatedly has stated his disdain for how Wall Street treated his company. Although he acknowledges problems in Mississippi with Beau Rivage, he says the analysts fundamentally erred in their evaluation that Bellagio swallowed Mirage customers:

Wynn: For 27 years ... on the whole we got treated absolutely wonderfully. But Wall Street changed ... the stock market is clearly a different place than it has been ... Companies that lose money are trading higher than General Motors.

The Mirage was a principal beneficiary of Asian business. Then the Asian business skipped town, which was $35 million to the bottom line ... (Even so), it was the most successful hotel in town besides Bellagio ... The cannibalization of Mirage was not an accurate statement. Mirage just lost a piece of business.

In Mississippi, we spent $700 million in a market with which we were not familiar. We were not perfectly targeted for the audience midweek ... Our success on weekends was unequivocal ... (But we were) not positioned the way we should have been ... The exaggeration of the response (by analysts) was totally disproportionate to the evidence ... These are not the opinions of people who matter. It's not clear what the thought process is. What is clear is the thought process is not rational.

Gaming in Nevada

Wynn: Gaming has been able to hold its own when it had its feet on the ground. When the gaming lobbyists haven't thought out our position, when they were acting like everyone else and being dumb sometimes, they lost.

Wynn brought up a 1999 bill designed to force IGT and other slot manufacturers to renegotiate contracts with resorts. Wynn, who is a friend of IGT Chairman Chuck Mathewson, clearly believes that the companies that tried to press the issue in Carson City miscalculated. He also brought up the Clark County Commission's passage of an anti-Wal-Mart ordinance last year as an example of a special interest overreaching.

Wynn: The union wanted it very much and had the support of a powerful County Commission coalition to stop Wal-Mart ... It was a totally outrageous and improper use of legislation, to use the Legislature for a competitive thing.

Gaming in Washington

Wynn insists that the NCAA betting bill is different than most gaming-related measures because of the media-friendly coalition of college coaches and the perception that it is about betting on kids. And he thinks that obviously illogical, anti-gaming legislation will continue to fall by the wayside. But he said the lobbying presence of the American Gaming Association is essential.

Wynn: Without a trade association ... you're a dead duck, you've got no voice ... without that, politicians and legislation is inextricably bound up in the election process. It doesn't buy you a vote, but it does buy you two minutes of time. Without it, you're in a lot of trouble.

Indian gaming in California

Wynn: Right now, we're a little bit in denial, a little euphoric because it hasn't happened yet ... (The impact will be) something interesting and substantial, and it will hit different parts of the Nevada economy differently.

It'll come in this way: Someone comes over here to enjoy slots and slot clubs and have fun and get a good room rate six times a year. Now all of a sudden they have everything in Palm Springs and San Diego. So they make two trips instead of six, or maybe five.

Gaming and taxes

Wynn: I'm making a very plain statement: A cross-section of the gaming industry is not healthy, and has been getting less healthy as a group ... I think (Gov. Kenny Guinn) is right, that we've got to revisit the tax base. In this state, any tax you revisit impacts gaming more than anyone else. Business. Sales. Payroll ... Let me put it this way: One way or another, the gaming companies of Nevada are going to pay more taxes.

The mayor and downtown

Wynn clearly is not sanguine about downtown's future -- he now owns no property there -- although he thinks if the city could find the right use for that vacant downtown land, revitalization is possible. As for His Honor Oscar Goodman:

Wynn: You know what's great about him; he believes anything is possible. He wants something good to happen on his watch so bad he can't sleep at night ... He is brimming with optimism. He wants a better tomorrow and he thinks he can make that happen ... I'm a similar kind of personality.

As for Goodman's stadium idea, which Wynn first encouraged him to consider, he now says: "I don't know. There are so many caveats to that discussion ... In certain scenarios, it's a wonderful idea; in others, it gets to be pretty tenuous."

The NAACP

Wynn did not hold back when he was asked about the local NAACP's demand of $100 million from MGM Mirage and its declaration that he was next on the list:

Wynn: The NAACP in Las Vegas is a bogus organization. The chapter has lost its footing ... Like anything else, if you don't have good help, the quality of leadership fails, the organization becomes a caricature of what it might be ... No one's taking it very seriously ... It's a group of people who are mostly near-misses.

What he brought to LV

Wynn: A higher level of taste to the game ... There was a blue-collar mentality, a lot of people thought Las Vegas was not for them ... I'm not talking about super-rich people, but people who wanted better food, better clothes, better shopping ... (We) brought to the game a sensitivity for good taste.

If there's a difference between Mirage Resorts and my regime and the rest of the companies, it wasn't a volcano or pirate show, it was my attitude toward the public. I always believed people knew the difference between good and bad, between clean and ugly ... A lot of places people built here tastelessly. There's a lot of ugly crap in Las Vegas, I say, with apologies to the fellows responsible. There's more bad taste on the Strip today, more hideous, ugly architecture than you can shake a stick at.

His image

Wynn talked about attorney Marty Keach's performance at the state Supreme Court during a recent case involving Mirage Resorts, in which Keach wondered if the justices could be impartial because Wynn is "much more powerful than the governor."

Wynn: That was a technique. He was trying to intimidate them (the justices) to vote for his client. He didn't have the law on his side. When you don't have the law, you do some kind of theatrical performance. That's very ill-conceived in that environment, to attack the integrity of the judges in the Supreme Court of the state of Nevada ... For the benefit of some kind of media, he falsely accused these people who are very serious citizens. It was a crazy thing to do. It was technically unethical and improper. He'll be lucky if he doesn't get brought up on charges. You're not allowed to do that, to go up and tell the Supreme Court judges they're dishonest ... Mr. Keach was imperious, belligerent and acted very foolishly.

When asked about his image for calling politicians and journalists and ripping them to shreds for something they had said or written, Wynn was unrepentant.

Wynn: The idea that because I was the CEO of Mirage Resorts that I didn't have as much right to free speech as you guys in the press is ridiculous. The guys in the press don't like it if anybody talks back to them. You're very sensitive. The idea is you're supposed to sit there and take any criticism people level at you quietly? I've always been a guy who does not turn the other cheek.

Wynn insisted his political clout has been greatly exaggerated by the media, that he has "never had any influence in this state other than what I had because of my employees."

When pressed on whether he really believes that his willingness to go after politicians also has made him an intimidating figure, he replied:

"If that causes people to be intimidated, the fact that I answer back, that I don't suffer in silence ... if people find the response is intimidating, that's right, I guess."

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