Wynn reveals merger details

David Strow

Wednesday, Sept. 20, 2000 | 11:36 a.m.

LOS ANGELES -- What will happen next at the Desert Inn?

Steve Wynn, making one of his first public appearances since this summer's buyout by MGM Grand Inc. of Mirage Resorts Inc., still isn't saying. But he regaled hundreds of California business people this morning with insights from his last big deal.

Wynn spoke at a conference hosted by the Los Angeles chapter of the Association for Corporate Growth, which began today at a Beverly Hills hotel.

Wynn said the deal helped motivate him to buy and redevelop the Desert Inn property. The Bellagio resort on the Las Vegas Strip, he noted, cost $1.6 billion to build, but was being valued in the Mirage sale at $2.6 billion.

"If the Bellagio is the same hotel, and it's now worth $2.6 billion instead of the $1.6 billion it cost to build it, I thought, 'Damn, I've got to go get me another piece of property.' "

Wynn said preliminary discussions about an MGM Grand-Mirage merger had started in 1999, when a Mirage director who was one of Kirk Kerkorian's best friends relayed messages that Kerkorian might be willing to sell his company to Wynn. Wynn declined.

Wynn said he was experiencing a feeling of letdown following construction of the Bellagio and that he wasn't being fulfilled by the design of a smaller property in New Jersey. Kerkorian, he said, was also growing bored.

As Mirage's stock fell, Wynn said he began to consider taking Mirage private. But he decided that such a deal was probably not doable.

"I really couldn't go private because I'd smother the company with too much debt," Wynn said. "And who was going to buy a company for north of $6.5 billion? It looks like a life sentence."

Then came Kerkorian. Rebuffed several times in offers to sell MGM Grand to Wynn, Kerkorian now proposed a $17 per share offer for Mirage.

Wynn, describing an excited Kerkorian, said he was offered whatever he wanted to make the deal happen, even the opportunity to run the company.

To Wynn, it was the only opportunity he believed he'd have to cash out.

"There was only one guy willing to pay more than $6 billion for a gaming company, and this was the guy," Wynn said.

"We did not want Kirk Kerkorian to go away. I may be a better developer than Kirk Kerkorian, but I'm not a better deal maker. If I go nose-to-nose with Kirk Kerkorian, I lose."

In a meeting with Kerkorian shortly afterwards, Wynn told Kerkorian he would sell, but only with two conditions -- one, that Kerkorian not make any counteroffers and two, that if the deal couldn't be struck, both companies would issue a joint press release indicating their willingness to go their separate ways.

Kerkorian stuck out his hand to accept. Wynn then hit him with his price -- $21 a share. Wynn said he reached this price after MGM Grand President Jim Murren said the company expected $150 million in synergies from the merger.

Kerkorian visibly flinched, Wynn said, then began to argue that such a deal would be dilutive.

"Kirk, you own 66 percent of the company. You decide what's dilutive," Wynn said.

Despite Kerkorian's deal-making reputation, Wynn then played a bit of hardball. After a day of posturing on both sides, Wynn called Kerkorian and said he was losing enthusiasm for the deal. MGM Grand officials asked Wynn to call back after they had the opportunity to draft a press release.

Wynn's colleagues thought Kerkorian was getting ready to make a counter offer. Wynn said he knew better.

"Kirk won't make a counter-offer once he has put out his hand," Wynn said. "They're putting together the money."

Within hours, Wynn had his $21 per share offer.

At the DI, Wynn said he can do again what he does best -- build a hotel that corrects the shortfalls of the Bellagio at a price lower than the megaresorts.

MGM MIRAGE, meanwhile, has soared after the Mirage takeover.

"Maybe that's what all this is about, the stock going up," Wynn said. "Me, I'm going to stay private and go for the money."