Wynn faces legendary deal maker in Kerkorian

David Strow

Tuesday, Feb. 29, 2000 | 11:03 a.m.

In a high-stakes poker game for control of the Las Vegas Strip's most well-known gaming company, Mirage Resorts Inc. Chairman Steve Wynn is facing off against a formidable opponent in MGM Grand Inc. controlling shareholder Kirk Kerkorian.

Both men share credit for shaping the Strip into its present-day form. But while Wynn has spent most of his career building Mirage Resorts, Kerkorian has amassed a multibillion-dollar fortune by leaping at opportunities when the price was right -- deals that added to Kerkorian's fortune, even if they often didn't work out the way Kerkorian had originally planned.

In the end, observers say this may give Kerkorian an edge, though Wynn has already fended off one of Kerkorian's flirtations with his company.

"The game being played is one Kerkorian has played many times," said Bill Thompson, chairman of UNLV's department of public administration. "He would certainly have the upper hand here, to the point where I do think Steve Wynn's best alternative is to work this out."

The two have vastly different personalities. Wynn revels in the limelight, and pays close attention to each detail and casino within the Mirage chain. Kerkorian, by contrast, shuns public attention, and prefers to leave management of his business operations to trusted lieutenants, such as J. Terrence Lanni and Alex Yemenidjian.

That suggests there would be an opening for Kerkorian and Wynn to team up, especially if the billionaire were willing to hand over the chairmanship of a combined company to Wynn. But the two would have to overcome their different business philosophies -- and Wynn would have to accept the idea that he was no longer ultimately the one in charge.

"The things that Wynn holds dear, such as art, are frivolous (to MGM Grand)," said Anthony Curtis, publisher of the Las Vegas Advisor newsletter. "I don't see it as a match at all. In the Wynn empire, art makes sense. But if you're going to meld it into a steak-and-potatoes company like MGM Grand, they're just so different.

"I just don't see how a guy like that (Wynn) will ever come to work and not be the top banana. If he can't control this, then I don't know what's going to become of him."

One reputation Kerkorian and Wynn share is their contributions to the Strip. Three times, Kerkorian has built what at the time was the largest hotel in the world -- the International (now the Las Vegas Hilton) in 1969, the first MGM Grand (now Bally's) in 1973, and the present-day MGM Grand, which opened in 1993.

Wynn, a later comer to the Strip scene, has made no less of an impact on it. His opening of the Mirage in 1989 is generally credited with setting off a building boom on the Strip that transformed Las Vegas Boulevard over the next decade. Wynn distinguished himself again in 1998 with the $1.6 billion Bellagio -- the most expensive resort in Las Vegas history, a property that set a new standard for high-end properties on the Strip.

"In the history of gaming and the Strip, Wynn and Kerkorian are inseparable," said Michael Green, historian at the Community College of Southern Nevada. "Kerkorian really developed the megaresort when he built the International and the MGM. Wynn refined and improved it after a long drought of major construction on the Strip.

"Wynn's success probably inspired Kerkorian to come back into the game."

Kerkorian and Wynn each built their fortunes with a kick-start from a single savvy business deal.

Kerkorian's came in 1965, when he sold Trans International Airlines for a profit of more than $100 million. Kerkorian, a former World War II pilot, built the airline from a couple of war surplus planes.

Over the next several years, Kerkorian parlayed his profits into a wide array of businesses. He used the proceeds to acquire the Flamingo in 1967 and build the International in 1969. After selling both to Hilton Hotels Corp. in 1970, Kerkorian took over the Metro-Goldwyn-Mayer movie studio -- and used the famed MGM brand as the anchor of the 2,100-room MGM Grand hotel-casino, which opened in 1973.

Wynn's legendary deal came around the same time as Kerkorian was unloading his first two properties. In 1971, Wynn and a group of partners quietly purchased a 1-acre parcel of land on the Strip from Howard Hughes. The land was next to Caesars Palace -- and at the time, few people even knew the land was separate from the Caesars Palace land tract, or that it was for sale. (Ironically, Kerkorian was the man who sold the Caesars Palace tract in the early 1960s.)

When Wynn began talking about building a low-end "grind joint" on the land, he had Caesars Palace's owners over a barrel. Realizing they couldn't permit such a property next to the palatial resort, the owners paid Wynn and his partners more than $2 million in 1972 for the land. Wynn used the proceeds to begin buying up stock in the Golden Nugget in downtown Las Vegas -- a company he'd take over several years later, and use as the foundation to build his Strip empire.

Since that time, the two men have built their Las Vegas companies in very different ways. Kerkorian's style is buying and selling -- sometimes over and over again -- while Wynn builds and holds.

Perhaps nothing reflects the Kerkorian style better than Metro-Goldwyn-Mayer. Kerkorian bought the studio in 1970, sold off many of its assets, then sold it to Ted Turner in 1986. Kerkorian then repurchased the studio just months later -- without its library of movies. In 1990, Kerkorian sold off the studio again, this time to Italian financier Giancarlo Parretti. When accusations of financial misdealings threatened to close the studio, Kerkorian intervened, buying the studio in 1996 for the third time. Kerkorian now has $2 billion invested in MGM.

Kerkorian's first MGM Grand marked his longest-term Las Vegas investment -- after opening the property in 1973, Kerkorian held onto the property for the next 12 years, through the devastating fire in 1980 that killed more than 80 people. In 1985, he sold the first MGM Grand to Bally Entertainment Corp.

After selling the MGM Grand, Kerkorian picked up the Desert Inn in 1987 and the Sands in 1988. He quickly flipped the Sands property, selling it to Sheldon Adelson in 1989. The Desert Inn was a relatively longer investment -- Kerkorian held the property for six years before selling the resort to ITT-Sheraton in 1993.

That year was a watershed for Kerkorian in another respect -- in 1993, Kerkorian opened the second coming of the MGM Grand on the site of the former Marina hotel-casino, a property he acquired in 1990. With more than 5,000 rooms, Kerkorian had once again opened what at the time was the world's largest hotel, and brought his former vision back to life. He expanded his portfolio again in 1998, buying out the Primm family's Primadonna Resorts. The acquisition gave Kerkorian complete control of the New York-New York hotel-casino -- built as a joint venture with the Primm family several years before -- and a complex of three casinos on the California border southwest of Las Vegas.

By contrast, Wynn shunned acquisitions over those two decades, preferring to create and build his own properties one at a time.

"What's striking about Mirage is that they've been a relatively insular company," said Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada-Reno. "They've never bought anyone else's property. They've always started from scratch."

Wynn did sell once, unloading the Golden Nugget in Atlantic City to Bally Entertainment in the mid-1980s. But he parlayed these proceeds into the purchase of the Castaways from Howard Hughes -- land he would use to open the Mirage in 1989 and Treasure Island in 1993. Wynn followed these projects with the Monte Carlo -- a joint venture with Mandalay Resort Group -- in 1996, and the Bellagio in 1998.

For most of their years on the Strip, the two men never clashed publicly, and most who know both men say theirs is a respectful relationship. But that doesn't mean they haven't competed before.

Kerkorian first outtrumped Wynn in 1991, announcing the construction of his massive new MGM Grand just days before Wynn unveiled his pirate-themed Treasure Island -- taking some of the wind out of the sails of Wynn's announcement. The following year, Wynn bought the Dunes -- a property that had also drawn Kerkorian's interest. Wynn would later raze the property to construct the Bellagio.

Kerkorian would win the next race. When the Japanese owners of a land parcel at the northwest corner of Las Vegas Boulevard and Tropicana Avenue offered it to Wynn for $29 million, he passed it by. Kerkorian leapt at Wynn's missed opportunity, buying it for $32 million. He used it to build the New York-New York.

Wynn's casino empire sprawls along the west side of the Strip from Spring Mountain Road south, interrupted only by Caesars Palace. But Kerkorian's purchase may keep Wynn from ever reaching Tropicana Avenue. It's something Wynn still regrets.

"As I look back on it, we should have done it (bought the property)," Wynn said in 1998.

The competition between Kerkorian and Wynn turned hot last September, when Wynn announced that the billionaire had taken a 4.9 percent stake in Mirage Resorts. Though analysts hailed the purchase as a positive event, given Kerkorian's reputation -- and Kerkorian's aides insisted it was an investment-only purchase -- Wynn publicly warned Kerkorian against moving for control of his company.

"You can't buy Mirage," Wynn told Bloomberg News, vowing he'd fend off any attempt at a hostile takeover.

Kerkorian sold his stake two months later, and sources close to the billionaire said it was because he had been made to feel "very unwelcome" at Mirage Resorts. Still, Kerkorian netted about $20 million from his investment in the company.

If Wynn had reason to be nervous, it may have been because of Kerkorian's well-publicized battle for control of Chrysler Corp., which peaked in 1995.

Kerkorian began buying up Chrysler stock in 1990, shortly after it emerged from bankruptcy. He eventually spent $1.4 billion on Chrysler stock, acquiring 100 million shares. From this position, Kerkorian made his move, stunning Wall Street with a $23 billion takeover bid for Chrysler in April 1995. But Chrysler was ultimately successful in fending off Kerkorian, who signed an agreement with the automaker in 1996 in which he agreed not to own more than 13.75 percent of the company.

Still, Kerkorian hardly can be considered a loser in the Chrysler wars. When Chrysler merged with German auto giant Daimler-Benz AG last year, Kerkorian became the largest individual shareholder in DaimlerChrysler, with a 5 percent stake. Including dividends, Kerkorian's investment was valued at $5.9 billion at the time of the DaimlerChrysler merger -- more than four times the value of his original stake.

Though MGM Grand has implied it doesn't want to initiate a takeover fight for Mirage Resorts, Kerkorian's fight for Chrysler shows he's been willing to raise the stakes in the past, if the opportunity presents itself. Whether that will happen through MGM Grand -- a company where Kerkorian controls 63 percent of the shares -- is unknown.

"There's always somebody who won't take you at your word (that a company's not for sale), and they're going to do it anyway," said Dave Ehlers, chairman of Las Vegas Investment Advisors. "We'll see whether anyone at MGM Grand has got the stomach for this kind of thing.

"There's no way of knowing whether MGM would be willing to do that (launch a hostile takeover). There's no record of those things."