Wall Street waits for next move by gambling giants

Robert Macy

Thursday, March 2, 2000 | 10:40 a.m.

As Mirage Resorts was rejecting an unsolicited $3.5 billion takeover bid as inadequate, the chairman of the glitzy casino business was holding a "cordial" conversation with the leading shareholder in suitor MGM Grand, according to people familiar with the attempted acquisition.

Mirage chairman Steve Wynn called billionaire Kirk Kerkorian, MGM Grand's majority stockholder, on Tuesday, according to the sources, who spoke on condition of anonymity. One described the call as "very friendly and very cordial," the other as "amiable and cordial."

And separately, one casino analyst said there was talk on Wall Street that Wynn might become chairman of a combined company if MGM Grand succeeds in its bid. Wynn is known for his flamboyant style while Kerkorian is low key and prefers to remain out of the limelight.

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

Mirage spokesman Alan Feldman said the company would have no comment beyond Tuesday's news release, which rejected MGM Grand's bid and announced new defenses against hostile takeovers.

MGM Grand surprised the gambling industry Feb. 23 by offering to buy Mirage for $17 a share, a premium of 56 percent over its stock price. MGM Grand also offered to assume $2 billion in Mirage debt.

While the Mirage board rejected the offer, it left the door open for negotiations, saying the company "would be willing to consider a transaction which would fairly reflect the long-term values inherent in the Mirage properties..."

James Murren, MGM Grand's 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 noted a rise in Mirage stock Wednesday, adding that "if people thought it wasn't going to work, Mirage stock would be tanking."

In trading on the New York Stock Exchange, Mirage was up 18threequarters cents at $15.93threequarters a share, while MGM Grand was off 87half cents at $19.

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 under way for a new megaresort in Atlantic City.

Analysts believe the key to any deal will be how high MGM Grand is willing to bid.

"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."