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September 1, 2014

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Kerkorian strikes again

MGM MIRAGE's surprise bid to buy out Mandalay Resort Group had the familiar signature of a legendary deal maker.

Who else but Kirk Kerkorian, majority owner of MGM MIRAGE shares, could engineer such a stunning proposal to acquire one of the hottest casino companies on the Strip?

It was only four years ago that Kerkorian, who has waged boardroom war involving companies such as Chrysler Corp. and Metro-Goldwyn-Mayer, stunned the gaming world with an audacious acquisition bid for Steve Wynn's Mirage Resorts Inc.

Observers were as stunned over the weekend as they were in 2000 when Kerkorian engaged Wynn -- a casino executive with a vastly different style.

In the end, Kerkorian bought Mirage, although Wynn's negotiating resulted in the price for Mirage going up from $17 to $21 a share in the $6.4 billion deal.

And, in a fairy-tale "all's well that ends well" finish, Wynn wound up taking his cut of the deal to buy the Desert Inn and turn the site into what promises to be the next big must-see Strip resort, Wynn Las Vegas, which will open next year.

Kerkorian and his company didn't fare so badly either -- they took control of one of the prime Strip resorts Wynn built, Bellagio, and the property credited with generating Las Vegas' boom days, The Mirage, as well as Treasure Island, the Golden Nugget (which recently changed hands again), half of the Monte Carlo and one of Biloxi, Miss.'s best properties, Beau Rivage.

"The game being played is one Kerkorian has played many times," Bill Thompson, chairman of the Department of Public Administration at the University of Nevada, Las Vegas, said at the time of the 2000 deal for Mirage Resorts.

Thompson, contacted Sunday about the Mandalay Resort Group deal, said he could almost say the same thing now.

"It's clear that he's found that the best opportunity for casino gambling in the world is in Las Vegas," Thompson said. "In one sense, he's voting on the Las Vegas Strip with this deal."

But the fact that Kerkorian is making a play for Mandalay Resort Group indicates to Thompson that maybe the 87-year-old financier doesn't see as much opportunity in international deals as some experts have suggested.

"Maybe England is not opening up like he expected," Thompson said in reference to Great Britain's deliberations on tax policies accompanying the expansion and deregulation of gambling in that country.

MGM MIRAGE's decision in May not to bid any higher than $555 million to acquire Wembley Plc, a British operator of dog tracks in the United Kingdom and Rhode Island, lends credence to that theory. MGM MIRAGE bowed out of the bidding.

"He's a great deal maker, but maybe there were a few things that didn't look right," he said. "Maybe stuff was not working out as he expected and he has some capital and he said, 'What can I do with my money?' "

Whatever the answer is, it's not likely to come from Kerkorian himself. He shuns public attention, preferring to leave management of his business operations to trusted executives such as MGM MIRAGE Chairman and Chief Executive Terry Lanni.

Kerkorian has earned a reputation as a shrewd investor with some of his most notorious deals occurring outside the gaming realm.

In 1965, Kerkorian, a former World War II pilot, sold Trans International Airlines for a profit of more than $100 million after building the airline from a couple of war surplus planes.

He used the profits to acquire the Flamingo in 1967 and to build the International, now the Las Vegas Hilton, in 1969. At the time, it was the largest hotel in the world.

Kerkorian sold both of those properties to Hilton Hotels Corp., in 1970, using the proceeds to buy the Metro-Goldwyn-Mayer movie studio. The name became the cornerstone for his MGM Grand hotel-casino, which opened at the Strip and Flamingo Road in 1973. That hotel also was the largest in the world when it opened.

He held the hotel and studio for several years, even enduring one of Las Vegas' worst disasters, a 1980 fire that killed 83 people. In 1985, Kerkorian sold the property to Bally Entertainment Corp., which turned the hotel into Bally's hotel-casino.

Kerkorian picked up the Desert Inn in 1987 and the Sands in 1988. He quickly sold the Sands to Sheldon Adelson, who eventually transformed the site into the Venetian hotel-casino, and he sold the Desert Inn to ITT-Sheraton in 1993.

Meanwhile, Kerkorian stripped away many of the MGM Studio's assets and sold them to Ted Turner in 1986, buying it back a few months later after Turner had secured its film library. In 1990, Kerkorian sold the studio again, this time to Giancarlo Parretti, an Italian financier. Kerkorian acquired the studio for a third time in 1996 after accusations of financial misdealings threatened to close it.

Kerkorian's various dealings in the early '90s enabled him to build the largest hotel in the world for the third time -- the MGM Grand at the Strip and Tropicana Avenue on the old Marina hotel-casino site.

Both Kerkorian and Wynn considered buying the parcel across the street from the new MGM Grand and it was Kerkorian that emerged as the owner. He and partner Gary Primm built the New York-New York hotel-casino there, with Primm eventually selling his share of both that property and his three resorts on the Nevada-California state line to MGM Grand Inc.

Kerkorian has shown the same deal-making tenacity in his investments in Chrysler Corp. Last month, he testified in a court case in U.S. District Court in Delaware in which he has sued DaimlerChrysler AG, claiming that company engineered a takeover of Chrysler but called it a merger in order to avoid paying the acquisition fee.

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