Mirage shareholder sues over Wynn’s art options

Grace Leong

Thursday, March 30, 2000 | 10:48 a.m.

A Mirage Resorts Inc. shareholder is suing to stall the possible sale of much of the prized art at the Bellagio to Mirage Chairman and Chief Executive Steve Wynn at what the shareholder calls a bargain price.

Crandon Capital Partners, one of five shareholders that sued the Mirage board just hours after MGM Grand Inc. announced an offer to buy Mirage Feb. 23, filed another lawsuit in Clark County District Court on Tuesday.

The first suit pressed the Mirage board to take actions benefitting shareholders. The new suit alleges Wynn's options to buy the art -- which he negotiated with MGM Grand -- may not result in the highest price possible for Mirage stock.

Crandon, which seeks an order to force Mirage to undertake an immediate evaluation of the artwork, accused Mirage of wrongfully entering an agreement that permits the art collection to be sold to Wynn at "below-market" prices, and also accused Wynn of using his influence to structure the deal at the expense of Mirage shareholders' interests.

Mirage and MGM agreed to a $6.7 billion merger on March 6, in which MGM will acquire Mirage for $21 a share in cash. Wynn will leave Mirage after the merger and has not disclosed his plans.

Wynn, who will reap at least $500 million before taxes on the closing of the deal, struck a key deal with MGM Grand in the merger agreement -- the right of first refusal on any offers made on the $400 million art collection.

Half of the art in the collection is now owned by Wynn and leased to the Bellagio for a fee of about $5 million a year. The remaining $200 million worth of art is owned by Mirage Resorts.

The agreement gives Wynn the option to buy any of the art that MGM receives offers for.

This provision was revealed in Mirage Resorts' annual report, filed on March 13 with the Securities and Exchange Commission.

The agreement specifies Wynn has the option of either paying an auction-house appraisal price set by Christie's International or Sotheby's Holdings Inc., or a pre-established price based on Mirage's "book value" of the painting.

Crandon, which accused Mirage board members of failing in their fiduciary duty to maximize shareholder value when they agreed to the deal, seeks an order to force them to "seriously consider all bona fide offers for Mirage's assets and to conduct fair and active bidding procedures."

"Were the artworks included in the price payable to Mirage's shareholders on the sale of Mirage, the members of the class would receive a higher price for their Mirage shares from MGM," the suit said.

But Alan Feldman, Mirage Resorts' spokesman, disputed Crandon's claims. "The artwork is included in the sale. (The shareholders) are suing based on the agreement for the transfer of the art should a bidder present itself."

"We will let the lawyers review the case and they will respond to it with the proper procedures in court," he said, declining to comment further.