Winner Takes All

by Christina Binkley

  Mirage had 190 million shares outstanding. That put the show’s price tag at $95 million.

  Wynn confided that he was two-timing Miss Spectacular. He and Elaine had been to London to see Mamma Mia!, a musical set to the music of the Swedish pop group ABBA. He was considering adapting Mamma Mia! for Las Vegas. That meant reducing the show to the shortened attention span of a gambler or conventioneer who had a lot of partying, eating, shopping, and wagering to fit into a few days in Vegas.

  As they headed out of the Burbank recording studio, Elaine wondered if Miss Spectacular could win a Tony Award. It couldn’t, since Las Vegas isn’t Broadway.

  “We’ll make our own awards,” Wynn said with a grin. “The Carmine Award. No, the Bugsy Awards.” He pretended to give an acceptance speech by an actress who had won many theatrical awards: “But my Bugsy means the most!”

  “What’s next?” Elaine Wynn asked her husband.

  “Schmilken,” he replied. “Schmilken. Schmilken.”

  And they headed off to a late lunch with their friend Michael Milken.

  As if he didn’t have enough troubles already, Wynn took Miss Spectacular on the road long before she was ready.

  He invited Joe Coccimiglio, the analyst who had compared the Bellagio to Titanic and Waterworld, to fly from New York to Las Vegas on the sleek Mirage Gulfstream jet.

  This was heady stuff. Before Dan Lee had left, analysts rarely had access to “Mr. Wynn.” On the plane, Coccimiglio asked if they might become more familiar. “I asked him if I could call him Steve, and he said it was fine,” he said a few weeks later. “That was the highlight of my career,” Coccimiglio gushed. “For five hours you just feel completely at ease with him.”

  Wynn spent an hour of the flight giving the analyst the full pitch on Miss Spectacular. He played the music and sang along with the songs. “It was a little corny, but I kinda like that stuff,” said Coccimiglio. “I think it has enormous potential to be a crowd draw.”

  Coccimiglio was planning to come out as gay—an unheard-of move on Wall Street, where social attitudes haven’t moved forward much since 1960. He introduced Wynn to Ken, his partner since 1986. Wynn admired the courage involved in being forthright. Wynn wanted to offer Coccimiglio a job as his chief financial officer. But Coccimiglio was finished with Wall Street and its environs.

  “It was hard to be gay on Wall Street,” he said several years later. “At Bellagio’s opening, I went down to the party and Ken stayed up in the room. I couldn’t take him to the party with Dan Lee and Steve Wynn and all those guys.”

  Coccimiglio stunned his colleagues and clients the following June by broadcasting a letter announcing that he was gay. “I knew I was leaving, so it wasn’t brave,” he said later. He resigned his job shortly thereafter.

  Coccimiglio came away from that flight with the sense that Wynn had “got the message about Bellagio and Beau Rivage going over budget.” The new Atlantic City project would come in on budget at about $1 billion, he felt sure.

  Given this extraordinary level of access, Coccimiglio tentatively suggested that Wynn demonstrate his faith in Mirage Resorts after his sales of stock. He suggested that Wynn consider selling his art and using the proceeds to buy back stock in Mirage Resorts. “He really bit my head off on that one,” Coccimiglio said. “He thinks he has the right to spend money on a personal basis, and he gets a great deal of personal satisfaction out of it.”

  Out of the frying pan and into the fire.

  Wynn agreed to be keynote speaker for a Deutsche Bank Alex Brown conference about a month after the recording session for Miss Spectacular. This was one of those duties that Dan Lee used to handle.

  These conferences amount to cattle calls for corporate chief financial officers to market their stocks before a room full of an investment bank’s clients. Typically, each company gets thirty minutes to present in a day that’s broken up with lunch and a keynote speaker.

  Jim Murren, president and chief financial officer of Kerkorian’s MGM Grand, was in New York to present at the same conference. Murren took advantage of his trip to the city to do some secretive due-diligence fact finding on Mirage Resorts.

  Murren stopped in at the company’s marketing office and went by the Wynns’ Upper East Side apartment building, where he spoke with the doorman. “Is this where Steve Wynn lives?” Murren asked.

  “He said, ‘Yeah’—and of course it wasn’t true,” Murren says. “Mirage Resorts owned that apartment.” Typically, a company-owned apartment would be available for corporate use—and not be the home of a single executive.

  Steve Wynn strode into the New York Palace Hotel around noon on Tuesday, November 9, 1999. At twelve thirty, the mogul began a riveting half-hour history of his role in Las Vegas’s renaissance. Then he told the audience of analysts and investors about his plans for entertainment and about Miss Spectacular and the 1,800-seat theater he planned to build for his very own “Broadway” show.

  “I know all of you measure things in charts and graphs, but that’s not how I look at this industry,” he told the room full of three hundred investors, according to one attendee. He didn’t acknowledge the company’s recent troubles. He didn’t discuss the cost cuts or other efforts he was making to fix them.

  Instead, Wynn went visionary. He brought out a sound system.

  And, just as he had been doing for months, he played several songs from Miss Spectacular. Steve Wynn being Steve Wynn, he didn’t just stand dumbly while the music played. He hammed it up. He sang along. He closed his eyes and swayed.

  Unfortunately, this was a room full of conformist Wall Street types who didn’t know Steve Wynn. Given his vision problems, one person there says Wynn’s swaying with eyes closed looked “like Stevie Wonder.”

  “People were looking around the room like, ‘This guy has completely lost his marbles,’” said one of the corporate presenters.

  Someone called the New York Post.

  The next day’s headline on the Post’s Page Six gossip column read:

  WARBLING WYNN SHOCKS WALL ST.

  Page Six is an institution. (It doesn’t always appear on page six—on that day, it actually appeared on page eight of the paper.) It’s the kind of column that gets read early by a broad array of people, its reach extending far beyond New Yorkers who buy the Post each day.

  What readers of Page Six learned on November 10, 1999, was that witnesses to Wynn’s lip-synching raced from the room to call in their sell orders on Mirage Resorts stock.

  Yet, as at the time that Dan Lee was fired, somebody thought Mirage shares were worth buying that day. The Post item ended by noting that “If Wynn’s performance yesterday did trigger some sell orders, the stock didn’t suffer in the long run. It dipped after he stopped singing, but it recovered to finish 12 cents up on the day at $13.625.”

  People back at Mirage Resorts in Las Vegas didn’t perceive a threat. The stock was fine and besides, Wynn’s performance didn’t strike anyone in Las Vegas as particularly noteworthy.

  “My thought was that he did nothing at that conference that he had not done at countless meetings in the past,” says Alan Feldman, then Mirage’s head of communications. “The first time I heard about it, it appeared on Page Six in the New York Post. I almost never take something seriously in the New York Post. I didn’t realize it had legs for several weeks. Plus, it sounded to us just like more of the same old Steve—no big deal.”

  But Wynn’s performance did have legs.

  Dan Lee by that time had moved to Seattle for a job as chief financial officer of HomeGrocer.com, a start-up Internet grocer. “I was at my office in Seattle, trying to get HomeGrocer off the ground,” Lee later recalled. “Suddenly, my phone was ringing off the hook. People were saying, ‘You’re not going to believe it—Steve was singing!’

  “I was like, ‘So?’” Lee said.

  Wynn had also sung along with Miss Spectacular for forty-five minutes at a commercial bank meeting at the end of October, according to someone involved
. But that one hadn’t gotten back to the guys at MGM Grand.

  What Feldman and Wynn didn’t realize was that Kerkorian’s team recognized an Achilles’ heel when they saw one. They let it slip that day that Kerkorian had sold his 4.9 percent stake in Mirage Resorts—though he had actually sold the ten million shares weeks earlier.

  On the day that the Post item appeared, Jason Ader, the casino industry’s leading analyst, downgraded Mirage Resorts’ shares to “neutral.” It was a bugle call to investors to sell their shares.

  “We had viewed [Kerkorian’s] investment as a potential catalyst for the stock, as Mr. Kerkorian is a brilliant investor who does not sit idly while a stock price languishes,” Ader wrote to Bear Stearns clients.

  “Separately, we are concerned about reports of erratic behavior by Mirage chairman Steve Wynn at an investment conference in New York on Tuesday, November 9, and little evidence that the company is focused on creating shareholder value.”

  Mirage shares fell to $12.50 that day.

  The Mirage Resorts team was blindsided. “There was an enormous overreaction to whatever happened at that meeting,” Feldman says. “[Steve] was not losing it.… I still feel guilty that I didn’t react more aggressively [to counter the adverse publicity]. I feel as though I failed him.”

  Thereafter, Wynn’s troubles multiplied like Job’s.

  Wynn hopped onto the company’s fourth-quarter conference call the following January, thrilled that his company had met Wall Street’s expectations for the quarter. He expected a warm reception, given the solid performance. Within moments, he boasted that his cost of capital, the effective interest rate his company was paying, was “six point five percent, give or take, depending on what Mr. Volcker’s been doing lately.”

  As anyone on Wall Street knew, Paul Volcker’s run as chairman of the Federal Reserve had ended more than a decade earlier in 1987. Wynn clearly meant to refer to Alan Greenspan. His slip of the tongue wasn’t as weird as it sounded: He sat on a think-tank board with Mr. Volcker and saw him regularly.

  But the erroneous reference to Volcker raised questions among some investors about his competence. Wynn’s eye disease doesn’t affect mental capacity, but not everyone understood that. One major Boston-area investment-fund manager ranted, “Did you hear that conference call? Paul Volcker? Hello? I’ve decided I want to live in his world. It must be a beautiful place. I mean, whooaaa.… He clearly doesn’t possess all the skills necessary to run the thing by himself.… The fear is that he doesn’t allocate the capital in a bloodless way instead of worrying about where the flower beds go.”

  Wynn, without anyone to protect him from Wall Street, recoiled.

  “The market is hopelessly short-term,” he complained in a sad interview. “They don’t get it. I wish I could do it without them.”

  Chapter Sixteen

  CHOMP

  It’s the deals. It’s the chase—when it’s a woman or a deal.

  —ALEX YEMENIDJIAN

  Kirk Kerkorian was watching the big bait float by.

  As Mirage’s share price tumbled to less than the company’s assets were worth, Kerkorian asked his forces to consider a takeover. His attorneys at Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro worked out a plan that would enable him to take control of the company without alerting Wynn, according to several people familiar with the plan.

  The attorneys proposed acquiring a controlling stake in Mirage Resorts stock through an investment bank that would hold title to the shares. There would be an agreement that MGM or Kerkorian could buy the shares from the blind holder in the future. The method was dicey and complicated, and Kerkorian rejected it. “Kirk doesn’t like things that are complicated, and he didn’t like this,” says Jim Murren.

  By February, Mirage Resorts stock was being further buffeted by Wynn’s announcement a month earlier that he would spend $250 million expanding Bellagio. Then Wynn was astoundingly honest in discussing his difficulties at Beau Rivage. He went over his mistakes in gory detail in a high-profile article in The Wall Street Journal. Wall Street does not reward refreshing honesty. What’s more, Wynn was nasty to analysts who criticized Mirage Resorts.

  Mirage stock hit an amazing new low: $10.625.

  On Valentine’s Day, Kerkorian opened The Wall Street Journal to see a startling column on the cover of the newspaper’s Money and Investing section. The article began like this:

  When Steve Wynn, chairman and chief executive officer of Mirage Resorts, held his first investor conference call in July, it went badly. “I was surprised,” Mr. Wynn says of the analysts who follow Mirage. “They were dumber than I thought.”

  Smelling blood, Kerkorian pulled in his circle of advisers that day. He located Gary Jacobs, his longtime lawyer, at dinner in Aurangabad, India, where he was visiting the Ajanta caves with his family. Jacobs worked from the hotel restaurant that night while his vacationing family dined for two hours. He used a telephone that the hotel brought to their table.

  One person involved says the MGM group came to the conclusion “that the stars were aligned perfectly.” For the rest of the week, Jacobs vacationed by day in India and worked on the Mirage deal at night. Jim Murren canceled a family vacation to Hawaii and got to work on the finances. Alex Yemenidjian worked from his office at the Los Angeles film studio.

  They code-named the effort to buy Mirage “Project Platinum”—a play on Mirage Resorts’ original name, Golden Nugget.

  It was Gary Jacobs’s idea to send Wynn a bear-hug letter—so-called because its grip is suffocating. Wynn would receive a polite letter offering to buy Mirage Resorts. The letter would name a price significantly higher than the company’s current stock price, and it would set an expiration date on the offer.

  Donald Trump once ignored a verbal offer for his troubled casino company from Tom Barrack, chairman of Colony Capital LLC. Barrack, a friend and a fan of Trump’s, chose not to force the issue, so he never publicized his offer or put it in writing. That was friendly.

  Releasing a letter publicly wouldn’t be so friendly. It would force Wynn’s hand, because he had a legal obligation to get the most value for investors. Mirage’s board would have to come up with a plan to create as much value for shareholders as Kerkorian’s offer, or face years of lawsuits.

  The letter was drawn up, reviewed by the group—including Kerkorian—and signed by Terry Lanni as chairman of MGM Grand.

  A week after the effort had begun, Kerkorian picked up the telephone and called Steve Wynn at Shadow Creek. It was a Tuesday evening, and Wynn was out to dinner. He was surprised to return home that evening to find two messages from Kerkorian. He guessed the calls had something to do with the land Wynn owned in Atlantic City. He called Kerkorian back around ten p.m.

  This is the way that Wynn describes the conversation that ensued.

  KERKORIAN: “I got a new idea. How about if I buy Mirage—the whole thing—for stock, cash, anything?”

  WYNN: “Are you kidding?”

  KERKORIAN: “If you don’t want to do it, I’ll forget about it. I wanna send you a letter.”

  WYNN: “If you send me a letter, I have to respond through the board.”

  KERKORIAN: “Oh. Well, Terry sent a letter. I didn’t want to, but he did it.”

  Then Kerkorian mentioned his price: $17 per share.

  Wynn laughed.

  Wynn says Kerkorian agreed that the price was low.

  After concluding the call with Kerkorian, Wynn told Elaine. She recounted their conversation six years later. “What do you want to do?” she had asked her husband. She says he responded, “I want to sell.”

  Wynn immediately got Michael Milken out of bed, according to another person involved. Milken called Kerkorian.

  At midnight, Wynn called another adviser, Bobby Baldwin. “Are you sitting down?” Wynn asked. He explained the terms.

  “What do you think?” Wynn asked.

  “It’s not enough money,” Baldwin remembers telling him.

 
The letter arrived the next day, as simple as a handshake, signed by Terry Lanni. The combination of Mirage Resorts and MGM Grand “would be the undisputed leader in our industry by any measure,” Lanni noted. There was a sweetener for Mirage’s board members, allowing them to join the board of the combined entity and thereby keep all the goodies associated with a casino—theater seats, hotel rooms, and party invitations.

  Lanni insisted the offer was “friendly”—meaning they wouldn’t take the bid directly to shareholders and try to buy the shares without Wynn’s agreement. Those were somewhat hollow words, given that both companies were incorporated in Nevada, which virtually outlaws hostile takeovers.

  Kerkorian’s team put the letter out over the newswires and notified the SEC. This move had one aim—to force Wynn’s hand, Jacobs says.

  When a Goldman Sachs banker named Dino Fusco saw the letter on the newswires, he and a colleague called Wynn’s home around five thirty a.m., Las Vegas time. A house servant answered and said Mr. Wynn was sleeping. “Wake him up, he’ll want to hear this,” replied the excited bankers, who had no idea that Wynn even knew about the offer.

  When Wynn got on the phone, he didn’t let on. “Oh, that’s interesting,” Wynn said coolly.

  Mirage investors weren’t sure what to think. Ken Londoner, chief executive of the hedge fund Red Coat Capital Management LLC, said excitedly that the deal would form a behemoth casino company. “It creates a dominant leader—nobody could compete with this thing. Lights out,” Londoner said.

  Later, Londoner wondered if Wynn would let go. “It’ll be interesting to see if Steve Wynn champions his shareholders, of which I’m one of them.”

  In fact, doubters were all over Wall Street. Normally, when a publicly traded company receives a significant unsolicited offer, the arbitrageurs of Wall Street immediately bid the stock price up close to whatever price they believe will close the deal—which is often at a higher price than the initial offer. In Mirage Resorts’ case, Wall Street was so skeptical that Wynn would let go that they wouldn’t even pay Kerkorian’s opening bid of $17 a share. The stock ran up only to $14.50. It was inconceivable that anybody could take Steve Wynn’s company.