Winner Takes All Read online

  Still, it lit a fire under the entire Strip. Phil Satre, Harrah’s chairman and chief executive, was visiting his daughter at Stanford that weekend. From his room at the Crowne Plaza Hotel there, he sent his financial troops to investigate the possibilities of a rival bid. Arthur Goldberg, chairman and chief executive of Park Place Entertainment, had just bought Caesars from Starwood Hotels. He opted to stay out. Park Place had just paid dearly for Caesars Palace, Paris, the Flamingo, and the Las Vegas Hilton. “I think I’d have real antitrust problems in Vegas,” he said. “For once it’s nice to be on the sidelines calmly watching, not having my gut wrenched.”

  Smelling a high-profile takeover battle, the Goldman bankers flew to Las Vegas that same day. They informed Bobby Baldwin of their fee: $25 million. When Baldwin relayed this news, Wynn asked that the bankers be ushered into his office.

  “Let me get this straight,” Wynn shouted, his face reddening. “Just so I understand. So I get a letter from Kirk Kerkorian. So far, he’s spent thirty-three cents. And you want to charge me twenty-five million to respond?”

  Wynn’s ranting excited his dogs. Perceiving a threat to their master, the German shepherds commenced to case the room for danger. One dog shoved his nose into Dino Fusco’s crotch in an attack position. The dog stayed that way, staring at the investment banker, for the full length of Wynn’s tirade. “I was petrified,” Fusco recalls. “I’m thinking, ‘This job isn’t worth this.’ I didn’t have children at the time and I was worried I wouldn’t have any.”

  Wynn’s tantrum proved to be worth $10 million. Goldman reduced the fee to $15 million.

  In those first days after the letter, Wynn seemed nonplussed. “How about that guy,” Wynn remarked to one old friend, referring to Kerkorian. He called on advisers—many of them, like Michael Milken and George Mason, were friends with both hunter and quarry.

  Several days passed, and as each side studied and worked on its strategy, Wynn made comments that suggested he was thinking about getting the price higher, rather than escaping Kerkorian’s clutches. He met privately with Gary Loveman and Phil Satre from Harrah’s, but they couldn’t match Kerkorian’s cash price. “I need some competition,” Wynn said a number of times, as though he hoped another bidder might drive the price up.

  Mirage scheduled a board meeting for February 29. Just prior to the meeting, Lanni sent a second letter. If Mirage’s board rejected Kerkorian’s $17-a-share offer, Lanni nudged, Mirage’s stock price would need to rise significantly higher in the future to provide the same return on a present-value basis. Naturally, Lanni put that out in a press release too.

  As the Mirage board meeting opened, the Goldman bankers passed out the “book.” The book is a standard strategy manual used in mergers and acquisitions. In a time-honored tradition, companies are given code names. Fusco explained that one of the junior bankers, a basketball fan, had used the names of Dallas and San Francisco teams. Mirage would be code-named Maverick. MGM would be Golden State.

  Elaine Wynn raised her hand: “Can we be Golden State?”

  “If we did that,” Fusco responded, noting that the books had already been printed, “you would be buying them.”

  Among the things the board accomplished that day was to give Wynn and his top executives lucrative new employment terms. These contracts seemed to obsess Wynn, according to several people at MGM Grand, in particular their effect on the New York apartment, Shadow Creek, the art that Wynn had collected, and the company’s Gulfstream III jet. “More time was spent on that than some of the substantive corporate issues,” Murren says.

  Later, Wynn called Kerkorian. “Me and my board have just met,” Wynn told him. “We’ve all decided that seventeen dollars is inadequate.”

  Wynn and Kerkorian agreed to meet privately at Bellagio to discuss a higher price. To prepare, Wynn says he called Michael Milken.

  “Milken had said when I spoke to him—’cause I had talked to him before the meeting—to listen for Kirk to say he’d put his own money in.” If Kerkorian was investing his own cash, Milken advised, it was a sign that he’d bitten.

  Kerkorian arrived at Bellagio through Wynn’s private back door. Wynn admired the way Kerkorian looked, in powder-blue slacks and a cream-and-blue checked sportcoat. “He looked like a model,” Wynn says.

  The two moguls sat on chairs in an alcove of Wynn’s office. Knowing his rival was deaf in one ear, Wynn took care to sit on the side of Kerkorian’s good ear. He ordered them each a cup of coconut sorbet from a shop in the casino. “I only want a little bit, Stevie,” Kerkorian said.

  Jim Murren had told Kerkorian that Mirage Resorts was worth as much as $22 or $23 a share to MGM Grand. But Kerkorian didn’t let on. He told Wynn he could go as high as $19. Wynn said he wanted $21. Kerkorian grimaced.

  Wynn says he also informed Kerkorian of two nonnegotiable provisions. He wouldn’t sign a noncompete agreement, because he intended to start work on a new casino almost immediately. And Wynn wanted to put out the press release announcing the deal—an honor that is normally left to the acquirer. Nevertheless, Kerkorian reached his hand across to Wynn. They shook on it.

  On a white notepad personalized with STEVE across the top (a Christmas gift from Mirage’s former entertainment chief, Sandy Gallin), Kerkorian took notes about Mirage Resorts’ financial status. Wynn dictated. Bank debt, bonds, revenues, and cash flows—all was scribbled down, sometimes with Wynn speaking so quickly that Kerkorian asked him to slow down.

  The more Wynn spoke, the more excited Kerkorian got. Much of the debt would have to be refinanced, Wynn warned. Kerkorian asked how much. He could handle that himself, he told Wynn. Like Milken had predicted, Kerkorian was in.

  “He was like eighteen years old again,” Wynn says. “He started eating his sorbet real fast.”

  When they were done, Kerkorian returned to the MGM Grand executive offices, which looked dowdy in comparison with Bellagio’s. He told his executive team that he had been entranced by the attention to detail at Bellagio—even in the back of the house, in areas the public would never see.

  “I don’t think his feet were on the ground,” says Murren. “You could imagine him with a pair of boxing shorts on.”

  Kerkorian was electric. He stood up. He slammed his hand on the table. “This is the opportunity of a lifetime, gentlemen!” the octogenarian announced.

  Alex Yemenidjian was busy trying to cut a deal with the Showtime network to show Metro-Goldwyn-Mayer’s films and attempting to lure Francis Ford Coppola into a ten-film deal. Kerkorian didn’t want him interrupted. So Wynn’s and Kerkorian’s representatives met at Metro-Goldwyn-Mayer’s offices in Santa Monica to work out the details.

  Wynn sent Bobby Baldwin and Stanley Zax, chairman of Zenith National Insurance Company. Zax’s presence as he sat beside Baldwin flummoxed Lanni.

  “I don’t know Mr. Zax, because he’s not on the board,” Terry Lanni said, more as a question than a statement, from the head of the table. Zax replied that he was the personal representative of Mr. Wynn. “And that’s the last thing he said in the meeting,” Lanni says.

  Zax had once introduced Wynn to Michael Milken. He advised Wynn throughout the dealings with Kerkorian and received a $3-million fee for his efforts, according to people involved—an expenditure that irked Lanni for years afterward.

  Baldwin opened with his cool poker player’s mien: “Gentlemen, I want to make this very clear. Under no circumstances will this company be sold for a penny less than twenty-one.”

  The MGM Grand team left the room and called Kerkorian. They had hoped to pay $20 a share.

  “Well, do you want it or not?” Kerkorian asked. “Do you want to lose it for the extra dollar?”

  Wynn flew to Sun Valley with Stan Zax for the weekend, leaving Elaine Wynn behind in Las Vegas. Elaine was still arguing against a sale. Wynn was highly strung and seemed to be suffering some separation anxiety, according to people who spoke with him that weekend. He was particularly emotional about the fate of some of
the art and the New York apartment. And of course, they still hadn’t yet signed the deal.

  Meanwhile, Kerkorian’s team was drawing up legal papers and financing for the $6.4-billion deal—the biggest ever in gambling at that point. An MGM attorney suggested inserting a standard noncompete clause that would bar Wynn from opening another casino for a period of time. “Absolutely not,” Kerkorian responded, according to a person who was there. “The best thing that could happen to us is that Steve comes back and builds a place across the street.”

  A flurry of phone calls between Zax, Wynn, Yemenidjian, and Lanni led to more hard feelings. (Wynn says he chastised Yemenidjian for returning a call that Wynn had made to Kerkorian, saying “First of all, when I call Kirk, it’s not your place to call me back.”)

  Zax suggested Kerkorian might come back with a lower counteroffer.

  “There’s not going to be a counter,” Wynn responded. “Kirk wouldn’t do it. We shook on it.”

  When analysts from Standard & Poor’s rating service told Terry Lanni he needed $1 billion in equity to maintain MGM Grand’s credit rating—or face higher borrowing rates and angering existing bondholders—Lanni stepped out of the room to call Kerkorian.

  “How much do you think you can raise?” Kerkorian asked.

  “Maybe half of it,” Lanni replied.

  “I’ll give half of it,” Kerkorian replied without hesitation.

  The MGM executives were pinching themselves as they went public with the news that they had just taken out Steve Wynn.

  In the following days, headlines from Japan’s Yomiuri Shimbun to The Washington Post heralded the end of an era. The London Independent famously announced: THE KING IS DEAD.

  It was poker to the New York Daily News: KERKORIAN SWEETENS THE POT BY 1B, STEVE WYNN DEALT OUT OF GAME. In Zurich, the SonntagsZeitung saw it in battle terms: DER KOENIG VON LAS VEGAS STRECKT DIE WAFFEN (translation: “The King of Las Vegas Lays Down His Weapons”).

  The following day, Alex Yemenidjian smiled in triumph, perhaps carried away by the elation: “It’s all mine!” Yemenidjian said. “I can do what I want with it.”

  Mirage held a lame-duck annual meeting a few weeks later in a meeting room at Bellagio. Coffee and cookies were provided on silver service. Elaine wore a cheerful peach-colored suit, but her face looked ashen. “It felt like we were divorcing the employees,” she says. Days later, she burst into tears at a meeting of the University of Nevada Las Vegas board, on which she sat.

  Steve had moved on almost immediately, she says. “I can’t be taking care of those people for the rest of my life,” he told her. “I have other things I want to do.”

  To his twenty-seventh annual meeting at Mirage Resorts, Wynn wore a deep-blue suit and royal-blue tie. He donned a pair of glasses to read his letter from the company’s annual report—a letter that recounted the company’s accomplishments. Wynn peered around the dark room—certainly seeing very little—and asked, “Is there anyone here who’s been a stockholder since 1974?” Several hands rose, and Wynn asked if he could have a photo taken later with one of them.

  Dan Lee, his former chief financial officer whose demise with Mirage probably led to Wynn’s own fall, was also in the audience that morning. “It’s the end of an era—I had to be here,” he said. Seated beside Lee was his friend Bruce Leslie, a local attorney, who said that Lee had talked him out of buying Mirage shares three days before the merger was announced: Lee had so firmly believed that Wynn would wriggle out of Kerkorian’s snare.

  A shareholder asked Wynn if there had been an alternative to selling.

  “As much as I’d have loved to buy back the company myself or buy a bigger share of it, it’s not that easy to do,” Wynn answered. “So I found myself a bit trapped.”

  “I’m very upbeat about what comes next,” the former casino mogul told them, “and thanks to Kirk Kerkorian, I’m going to be able to do that. But I don’t think I’m going to be a public-markets man. I find the stock market an unreliable measure of value. I’m going to opt out of the stock-market measurement of value.”

  Wynn said he doubted he could be agile enough for Wall Street. “How can we ever cater to a sixty-day time frame for investors when we’re building resorts for the ages?”

  He summed it up that day by saying, “I never thought that we would have this choice. I thought we were too big to be bought, frankly. It’s come upon me with speed and deliciousness. I think what’s going to happen to me is what I love—I like building stuff.”

  Alex Yemenidjian did not get to do with the Mirage casino what he wanted. Presented with the MGM-Mirage juggernaut, Terry Lanni decided to take back his old job as chief executive, in addition to chairman. This was a setback to the aspirations of several gentlemen with ambitions.

  When the Wynns moved out of their offices, Elaine Wynn grimly embraced Bobby Baldwin, who was staying behind. “Take good care of my people,” she told him.

  The closing dinner for Mirage—an event at which corporate executives and bankers congratulate themselves on a deal—was festive. Several Goldman bankers joked that “of course” they did the deal at $21 a share—it’s Las Vegas. Blackjack.

  Elaine, Steve, and Kenny Wynn laughed and high-fived.

  MGM Grand got stuck with the $15-million Goldman Sachs bill. Murren, who had done Kerkorian’s banking work himself, called the fee highway robbery for a deal that took twelve days to consummate. Vengefully, he taunted Goldman’s Dino Fusco that they should have negotiated harder.

  “We would have paid twenty-two,” Murren shot wickedly.

  The blast ricocheted. Fusco replied, “We would have taken twenty.”

  So, was it friendly or unfriendly?

  This is a question of great importance to Steve Wynn. He says he wanted to sell Mirage Resorts. That’s how he wants to be remembered.

  “People thought it was hostile because of that letter,” Wynn says, six years later, during a full-out rant in his office. The bear-hug letter was a “mistake” on Kerkorian’s part, he says. It was a move of naïveté, not cunning.

  “I don’t think that Kirk understood what that letter meant,” says Wynn. “ ’Cause when I said I’d have to take it to my board, he said, ‘Oh.’ And it was a real ‘Oh!’”

  “So Kirk supposedly didn’t understand what he was doing?” says Jim Murren. “That’s such a crock.”

  “The discussion was not so much over whether or not to send it, but whether to make it public,” says Gary Jacobs, Kerkorian’s lawyer, “and you didn’t have to be a genius to recognize that the way to bring pressure was to go public with the initiative.”

  Kerkorian could have canceled the crafty letter, or sent it to Wynn without filing it to newswires and the SEC. Lanni, Murren, Jacobs, and others involved all say the company wasn’t for sale until they’d publicized their bid and Wynn realized he had no escape route.

  Hostile. Friendly. Call it what you like. Wynn’s eggs were moved to Kerkorian’s nest.

  Chapter Seventeen

  WALKING ON AIR

  When Kerkorian comes, he says, “Do I need a tie? Do you have a seat for me?” When Stephen Wynn comes, it’s a production: He has his advance people come two hours early.

  —RESTAURATEUR SIRIO MACCIONE

  Terry Lanni moved into Wynn’s creamy office at Bellagio. For some time he kept a memento of the former occupant hanging on the wall across from his desk.

  It was the severed head of John the Baptist, the popular orator, still bleeding as it was presented on a silver platter to the biblical Kerkori—er, Salome.

  This gory seventeenth-century masterpiece by Peter Paul Rubens was one of Wynn’s purchases. Lanni eventually sold it for about $4 million to a New Jersey dot-com millionaire. Lanni replaced it with another memento of Wynn—a Rembrandt.

  The executive suites at the new MGM Mirage bubbled with rumors about the Wynn heyday. Lanni was told that the burled-elm millwork in the office had cost $1.4 million. Two naked holes in the elm are all that remains o
f the two baseball bats, Babe Ruth’s and another. Lanni says he was told that Mirage Resorts had purchased the bats at a charity auction, but there was no record of them in the company’s inventory.

  To Dale Chihuly’s great joy, Lanni quickly requested removal of the orange filters from Fiori de Como, the glass ceiling sculpture in Bellagio’s lobby.

  Pets and zoo animals no longer roamed the executive halls. Lanni wryly keeps a photograph of his two golden retrievers on a coffee table. He says, “I told people, ‘We can have pictures of dogs now, but no dogs.’”

  At Bellagio, Kerkorian “walks on air,” according to Jim Murren.

  Kerkorian celebrated his rise to the top of the Las Vegas heap by jetting to the south of France on his Boeing 737. He spent much of the summer on a yacht there, according to court documents in an unrelated lawsuit.

  To the victor go the spoils. The credit awarded previously to Bellagio’s creator began to disappear from print. Wet Design, the designers of Bellagio’s fountains, published a book about them in 2004—The Fountains of Bellagio. Wynn was barely mentioned. The concept album and compact disc notes for Miss Spectacular—produced by Jerry Herman, Don Pippin, and Larry Blank—don’t mention Wynn at all.

  Lee says he eventually apologized to Wynn for letting the mogul spin out of control. “I should have been in your face, screaming. Instead, I mumbled and I grumbled and I wrote little memos,” Lee says he told Wynn.

  Bobby Baldwin’s decision to stay on with MGM Mirage, based in part on advice from Michael Milken, stung the Wynns. But Baldwin, like many others at Mirage Resorts, welcomed the calmer seas at the new MGM Mirage.