Kerkorian, MGM Grand offer $5.5 billion for Wynn's Mirage Resorts

Prospect of reviving a faded empire


February 24, 2000|By BLOOMBERG NEWS

Las Vegas -- Billionaire investor Kirk Kerkorian and his casino company, MGM Grand Inc., offered $5.5 billion yesterday for Mirage Resorts Inc., betting they can revive rival Stephen Wynn's faded gambling empire.

MGM Grand, in a letter to Wynn, offered to pay $17 a share in cash, or $7 in cash and $10 in stock, for each Mirage share. That's 56 percent more than Mirage's closing price Tuesday. MGM Grand also would assume about $2.1 billion in Mirage debt. Mirage said it would consider the offer.

If successful, Kerkorian would take over some of the largest and most expensive hotels ever built, including Mirage's $1.6 billion Bellagio, which opened two years ago in Las Vegas. Mirage shares had dropped 47 percent in the past year after Bellagio and the Beau Rivage casino in Mississippi failed to generate the expected returns.

Mirage "spent close to $3 billion on two properties and got very little contribution to the bottom line," said McDonald Investments Inc. analyst Dennis Forst, who rates MGM Grand shares "buy" and Mirage shares "neutral." "They do a great job for their customers, but they haven't done a very good job taking care of their shareholders."

MGM Grand shares rose $1.4375 to $41.8125 yesterday. Mirage rose $3.625 to $14.50.

MGM Grand's bid could pit two of the leading developers of the modern Las Vegas against one another. McDonald's Forst said he would be "shocked" if Wynn accepted $17 a share for Mirage.

Mirage Chairman Wynn, 58, is credited with leading the industry in the development of more shops, upscale restaurants and luxurious hotel accommodations to bring tourists into gambling resorts. Since he opened the Mirage in Las Vegas in 1989, the number of tourists has risen from 18.1 million to 33.8 million in 1999, according to the Las Vegas Convention and Visitors Authority.

Kerkorian opened the MGM Grand on the Las Vegas Strip in 1993. It's the world's largest hotel. In 1996, MGM Grand and Primadonna Resorts Inc. opened the New York-New York hotel and casino, built as a replica of the New York City skyline.

The combination of MGM Grand and Mirage would create one of the world's largest casino companies. It would be the biggest casino operator catering to the world's wealthiest gamblers, analysts said.

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