Mirage shareholders to meet on merger

David Strow

Monday, May 8, 2000 | 11:10 a.m.

Shareholders of Mirage Resorts Inc. will vote May 30 on the proposed $6.7 billion merger with MGM Grand Inc.

The shareholder meeting date was disclosed Friday afternoon in a proxy filing with the Securities and Exchange Commission. The meeting will be held at the Bellagio at 9 a.m.

At the meeting, shareholders will be asked to approve MGM Grand's offer of $21 per share in cash for all outstanding shares of Mirage Resorts. Mirage Resorts' board of directors has already approved the transaction. Both companies are based in Las Vegas.

The proxy statement also contained a rare glimpse into the financial projections of Mirage Resorts officials for the next five years -- numbers the company has previously kept confidential.

The numbers were first disclosed to MGM Grand during merger talks and used by that company in determining the acquisition price.

The filing said Mirage Resorts projected 2000 net income of $216 million, or $1.08 per share, as of late February. This would represent a 54 percent increase over 1999 on a per-share basis -- and would beat consensus analyst estimates by 13 percent.

Cash flow would reach $688 million, Mirage Resorts projected, while revenues would rise 10 percent to $2.65 billion.

Just one month after these projections were made, Mirage Resorts beat first-quarter analyst expectations by 27 percent, recording net income of $55.8 million, or 28 cents per share.

Continuing into 2001, Mirage Resorts projected net income of $254 million, or $1.25 per share, an 18 percent increase over expected 2000 figures. That would have beaten analyst expectations for 2001 by 19 percent.

By 2005 Mirage Resorts projected it would reach net income of $433 million, or $1.91 per share. Revenues would hit $4 billion, while cash flow would reach $1.04 billion, the proxy said.

Dave Ehlers, chairman of Las Vegas Investment Advisors, said the merger's ultimate benefit to MGM Grand may be more substantial than these projections.

"From MGM's prospective, they are looking at considerable economies of scale," Ehlers said. "I would say (the benefits) will be larger. They bought some of the finest properties in all of gaming."

Continued increases in air traffic and passenger counts to Las Vegas could also push the benefits higher, Ehlers said.

With more flights, "there would be more people than implied in those projections," Ehlers said. "Those (projections) don't sound out of line at all."

The proxy statement also contained new details about Mirage Resorts Chairman Steve Wynn's efforts to acquire the Desert Inn. Wynn has agreed to buy the property from Starwood Hotels & Resorts Worldwide Inc. for $270 million in cash.

Prior to entering into the agreement, the proxy said, Wynn briefed the Mirage Resorts board and MGM Grand "of the opportunity to acquire the Desert Inn." The proxy didn't state whether Wynn was proposing a personal purchase of the property or a purchase by Mirage Resorts.

On March 31 MGM Grand responded that it "would not consent to an acquisition of or a significant investment in the Desert Inn by Mirage Resorts but would not object if Mr. Wynn were to make such an acquisition or investment for his own account."

On April 21 the Mirage Resorts board gave Wynn permission to acquire the Desert Inn. Wynn also agreed to give Mirage Resorts the right to buy the Desert Inn "at his cost" if the merger with MGM Grand fails but Wynn completes his purchase of the Desert Inn.