Wall Street waits for next move by gambling giants

Robert Macy

Wednesday, March 1, 2000 | 12:18 p.m.

The silence was deafening Wednesday as Wall Street waited for gambling giants MGM Grand, Inc. and Mirage Resorts, Inc. to make their next move in a multibillion-dollar buyout bid.

Two industry titans - Mirage Chairman Steve Wynn and MGM majority stockholder Kirk Kerkorian - reportedly had a "friendly" conversation Tuesday after Mirage announced it was rejecting MGM's $3.5 billion bid as too low.

And one casino analyst said there was talk on Wall Street that Wynn might be tabbed as chairman of a combined company if MGM and Mirage make it to the altar. Wynn is known for his flamboyant style while billionaire Kerkorian is low key and prefers to remain out of the limelight.

MGM Grand surprised the gambling industry last week by offering to buy Mirage for $17 a share, plus assume $2 billion in debt.

The Mirage board of directors rejected the offer Tuesday, saying the price was "inadequate." At the same time, Mirage left the door ajar for future negotiations, saying the company "would be willing to consider a transaction which would fairly reflect the long-term values inherent in the Mirage properties..."

Two industry insiders who spoke to The Associated Press on condition of anonymity said Wynn called Kerkorian Tuesday when the Mirage statement was released. One described the conversation as "very friendly and very cordial," the other as "amiable and cordial."

While Wall Street was speculating on a possible deal, the two companies were silent.

Alan Feldman, Mirage spokesman, said the company would have no comment beyond Tuesday's news release.

James Murren, MGM Grand president, did not return phone calls from the AP seeking comment.

But analysts were drawing their own conclusions.

"There's certainly some hope that the companies can get together," Joe Coccimiglio, a casino analyst for Prudential Securities, said Wednesday. "The hopeful investors are praying that management teams can make this work, find a price acceptable to both sides. The naysayers are worried that Mirage is just going through the motions and have no intention of doing a deal."

The analyst said Mirage stock was up early Wednesday and "if people thought it wasn't going to work, Mirage stock would be tanking."

Coccimiglio said there were rumors on Wall Street that Wynn might head up the new company.

"I'm hearing that Wynn would become chairman, and would focus on entertainment and new property development," Coccimiglio said.

"I do know he knows what he's doing on property design," the analyst said.

Wynn's company has built the Bellagio, Mirage, Treasure Island and Golden Nugget resorts in Las Vegas, Beau Rivage in Biloxi, Miss. and the Golden Nugget in Laughlin, Nev. Plans are currently underway for a new megaresort in Atlantic City.

"And he's had incredible success in entertainment, starting with Siegfried and Roy and now 'O'," Coccimiglio said, referring to hit shows at Mirage and Bellagio. "No other company has had the success he has had in the entertainment field."

Analysts believe the key to any deal will be how high MGM will go.

"MGM is adamant in not doing a deal if it's dilutive to their stockholders, which means they can only pay about $20 a share," said Jason Ader, an analyst with Bear, Stearns & Co. "A price much above $20 would be a challenge if they were to maintain the promise of not doing a dilutive deal."

"People think MGM may go as high as $20," Coccimiglio said. "Mirage still wants to get $23 or higher. Solving that value gap will be the challenge."