At Kerkorian’s behest, Terry Lanni, Bobby Baldwin, and Jim Murren signed rich contracts, including raises of 50 percent or more, extending six years—well past Le Reve’s opening. Lanni’s annual salary was doubled to $2 million. He also received a generous $6.2 million in restricted stock that year, and a $2.5-million bonus.
Under the terms of the merger agreement, MGM Mirage continued to pay for the Wynns’ medical care for several years, even after Wynn Resorts went public, according to people familiar with the situation. They claim Wynn made ample use of the plan, which covered cosmetic surgery as well as eye care and all medical care for himself, Elaine Wynn, Kenny Wynn, Marc Schorr, and at least one other former Mirage executive through 2003.
People who knew the Wynns well noticed that their appearances seemed to have been tweaked since the sale of Mirage Resorts. They sported tauter necks and foreheads. They looked smashing.
As he departed Le Reve’s groundbreaking ceremony, Wynn stumbled down a short flight of steps. It was a frightening-looking pitch-forward sort of fall that seemed, for a split second, as though it might end disastrously.
Wynn stopped his plunge with a skip of his size 13-D feet, landing lightly like a dancer, arms extended at his sides. Then he continued walking, and talking, as though nothing had happened.
Chapter Twenty-three
SUNDAY NIGHT FEVER
Las Vegas may not be the most elegant place, but it sure is fun, isn’t it?
—STEVE WYNN
Midnight. Sunday, June 13, 2004.
Deep in the executive suites at the Bellagio casino, Glenn Schaeffer hugged Jim Murren.
Schaeffer prefers to say he grasped Murren’s shoulders. Schaeffer is a guys’ guy. He is scrappy and macho, wearing in middle age the remnants of a tough upbringing in Pomona, California. He was once an amateur boxer. He was a beefy man at fifty, and he strode through casinos with a street-savvy jock’s swagger.
A backslapper, maybe, but Schaeffer is no hugger. “Do I strike you as warm and effusive?” he challenges, chin thrust out.
That Sunday night, though, half the Las Vegas Strip was riding on Schaeffer’s embrace. Earlier, he had cut a handshake deal to sell Mandalay Resort Group to Kirk Kerkorian. The trade would include a raft of Las Vegas casinos: the famous Luxor pyramid, the golden towers of Mandalay Bay, the cartoonish Excalibur. Eight billion dollars on a handshake. Another “biggest” for Kerkorian. By evening, though, the biggest deal ever in gambling was unraveling.
Glenn Schaeffer and Jim Murren had forged an unusual Las Vegas friendship. Schaeffer had been in Las Vegas twenty years when Murren arrived in 1998, fresh-faced from Deutsche Bank. Unlike Schaeffer, Murren is a hugger. He embraces office colleagues and pecks the cheeks of acquaintances. He wears a deceiving air of innocence and he is an expert flatterer. If he stabbed you, you wouldn’t know it until later. He is a rising star with Kerkorian.
Murren isn’t one of those old-style casino bosses. He is in bed by nine p.m. and rises before five a.m. to head straight to his office (Dan Lee’s former office) at Bellagio. There, he exercises and eats breakfast from a cart that is wheeled into his office by the hotel’s room service. On Mondays, Wednesdays, and Fridays, he would breakfast on an egg-white veggie omelet, stewed tomatoes, and carrot juice. On Tuesdays and Thursdays, the meal was oatmeal with soy milk, and orange juice or watermelon. Murren once hoped to play professional baseball, but now he practices yoga. “I just love chaturanga,” he once said, referring to the strenuous pose that mimics a long push-up.
In Las Vegas, Murren and Schaeffer existed at equal social levels—each president and chief financial officer of a casino giant. They made an odd pair: Schaeffer, the introvert who loved fine teas and sugary coffees and walked out on his second marriage because, he said, “I don’t need to be married”—and Murren, the extroverted family man with juice boxes and schoolwork cluttering his kitchen. Yet the two men discovered shared interests in art and wine. They started investing together—in art and in Schaeffer’s New Zealand winery—and were soon describing each other with terms like “soul mate” and “best friend.”
They became so close that Schaeffer was once invited along when MGM Mirage’s executive crew went on one of those team-building exercises on a nuclear sub. This would be like the president of Pepsi joining Coke’s executive team for a bonding ritual.
February 2004
This is when that deal really started, four months before the hug, at the noon break from one of MGM Mirage’s regularly scheduled board meetings. Murren sidled up to two of Kerkorian’s friends on the board and casually let it drop that he had been toying with a new development plan.
Kerkorian hadn’t built a new casino on his own since the MGM Grand. He had earned a reputation for a weak trigger finger. But he had, at least, not gotten in the way when the MGM Grand proposed building a set of condominiums called The Residences at MGM Grand. Initially, people had been polite about this chuckleheaded condo idea: Who would want to live on the Strip? But those condos sold—to speculators, high rollers, and a variety of jet-setters, many of whom hoped to establish residency in income-tax-free Nevada.
“We sold out five hundred and eighty-three units in seven weeks, which was astonishing to the world,” Murren said. “And no one was more surprised than we were.”
This fueled an inferno of Las Vegas condo building and got Murren thinking about the urban planning he had studied in college. He wanted to build a city within the city, where people could live and work. When he cornered Terry Christensen, Kerkorian’s lawyer, and Kerkorian’s old friend George Mason, Murren conveniently had some mock-ups of his idea along. He called his concept “55 West,” referring to fifty-five developable acres the company owned on the west side of the Strip.
Christensen and Mason liked it, and so did the rest of the board after Murren’s unscheduled presentation. By April, three sets of urban planners were competing to design the project, including the famous Robert Stern, who got the chance “because he’s Robert Stern. I had studied him in college,” Murren said.
This was not a company with Steve Wynn’s self-assured vision. They hired McKinsey & Company to produce a 231-page economic report. It suggested, to Murren’s disappointment, that a real city didn’t make financial sense: Affordable housing for casino employees and office space for doctors and other professionals wouldn’t pay enough.
Four weeks and $4 million later (“We had consultants consulting consultants,” Murren said), Kerkorian was looking at a recommendation that the company build three new hotels, 1,640 condo units, and 250,000 square feet of shops and restaurants on the fifty-five acres.
“Gee, I wish we had more land,” Murren said to himself.
Mid-May 2004
“Glenn, what do you really want to do with the rest of your life?” Murren said unexpectedly.
He and Schaeffer were sitting in a small conference room at Bellagio, talking about an art-investing fund and a trip to Art Basel in Switzerland.
“I don’t know. I’m having a lot of fun,” Schaeffer replied.
Mandalay Resort Group controlled forty-five acres next to MGM Mirage’s fifty-five acres. What’s more, the company’s executives appeared to be indicating that they wanted out. The previous autumn, Mike Ensign (father of U.S. Senator John Ensign) and Bill Richardson, Mandalay’s chairman and vice-chairman respectively, had inexplicably sold their stakes in the company: nearly $300 million worth of stock sold over a period of seven months. In Murren’s eyes, this was tantamount to hanging out a For-Sale sign.
“Glenn ironically had become the largest inside shareholder at Mandalay. And his interests outside were mushrooming—collecting art, making wine,” Murren said. “I wanted to see where his head was at, whether he would go to Mike Ensign and propose this transaction.”
So Murren suggested it to Schaeffer. “Well, why don’t we put the two companies together? You could go off and do all those other things.” Schaeffer cocked his eye. He thought he’d misunderstood.
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br /> Murren pressed, “How would that conversation take place?”
“It wouldn’t happen here,” Schaeffer replied, shocked.
They needed their bosses, Kerkorian and Ensign, to shake hands first. That happened the following Sunday.
Monday, May 31, 2004, 4:00 p.m.
Murren went to Schaeffer’s condominium to get started. Schaeffer’s 4,000-square-foot condo overlooked the Las Vegas Strip, but was hardly lived in; Schaeffer spent most of his time there reading in the bedroom. The living room was a private gallery—a Richard Serra here, a Donald Judd there.
Murren wasn’t sure where to sit. The room was a crowd of minimalist art and furniture, as though Schaeffer embraced the concept of minimalism, but not the practice. Murren lowered his long body onto a low-slung gray couch and stared at large spongy objet d’art at his knees. “Is that a table?” Murren asked. “Can I put my feet on it?” It was a coffee table of foamy black plastic, created by the Jetsons-esque designer Karim Rashid.
Schaeffer left the room to choose a New Zealand pinot noir. When he returned, Murren had removed his shoes and was curled into the sofa in his socks, propped up on several colorful pillows.
Schaeffer took a seat on a zebra-striped chair. “This is no Mirage,” Schaeffer said, suggesting that Mandalay wasn’t in a weak position with respect to the terms of the deal.
They emptied the bottle of wine. Later, Murren called Kerkorian to fill him in on a deal that would make him the unequivocal king of Las Vegas.
“Interesting,” Kerkorian said. “Let’s keep our options open. Learn more.”
Putting MGM Mirage and Mandalay together would give Kerkorian control of the southern half of the Las Vegas Strip just as Wynn was aiming his latest $2.7-billion extravaganza at Bellagio’s luxury clientele in the north. With Mandalay, Kerkorian would dominate the baccarat business and the world’s biggest gamblers. He would own resorts catering to every level of visitor from lowbrow to highbrow. He would own the biggest casino company in the world.
Of course, they had to have a code name. They had called the deal to buy Mirage Project Platinum. Mandalay was dubbed Project Silver.
Wednesday, June 2, 2004
“We have one bidder,” Schaeffer quipped to Mandalay’s board of directors. “He’s eighty-seven years old. I consider this a time-constrained offer.”
Later that day, Schaeffer handed Murren a press release with Mandalay’s first-quarter financial results, to be released the following day. The earnings were phenomenal—and Murren realized Mandalay’s stock would rise on the news, pressuring Kerkorian to pay more for the company.
MGM Mirage hurried to settle a price for their deal before the earnings became public. Leaving a cluster of more junior executives in the room, Terry Lanni asked Schaeffer and Murren to step outside and offered $66 per share.
“I wouldn’t have Kirk call Mike Ensign with an offer like that,” Schaeffer retorted. “If you’re going to start a bid, you should start at sixty-eight, and you’re going to end up with a seven in the front.”
Later, Kerkorian offered $67—a handy premium over Mandalay’s stock price, which closed that day at $55.48 per share.
Friday, June 4, 2004
The next morning, Mandalay’s stock surged so much that Kerkorian, Lanni, and Murren feared that word of their bid had leaked. They sought to put a lid on Mandalay’s stock by signaling their price. Kerkorian raised his offer to $68 per share and announced it with a press release.
Over the weekend, bankers at Merrill Lynch, hired by Schaeffer, called trying to get a bidding war going. Schaeffer was hoping Gary Loveman would bid, since Harrah’s was one of the few remaining companies big enough to buy Mandalay. But Loveman didn’t want to buy a Las Vegas casino company.
That really pissed Schaeffer off. Someone, he felt, should at least pretend to be interested—for no other reason than to weaken Kerkorian by forcing him to pay more for the company. “Don’t they teach that in business school?” Schaeffer asked.
Monday, June 7, 2004
Whoosh. Like a rocket, Mandalay was a Wall Street star.
Arbitrageurs assumed that they were seeing Mirage Resorts all over again. And they bid Mandalay’s stock up to an all-time high of $72.80 a share.
Ensign and Kerkorian called each other back and forth. Kerkorian raised his bid to $69 a share. Ensign, without expecting so much, asked for $73. “I can’t do that,” Kerkorian responded, according to someone familiar with the details of the conversation. Suddenly, what had begun as a friendly deal was looking hostile. For three days, Schaeffer studied Kerkorian’s purchase of Mirage Resorts, sniffing for clues to the billionaire’s behavior. Schaeffer asked Merrill Lynch, “‘Has anyone ever lost a deal over a dollar a share?’
“We were in combat—people’s emotions were getting involved,” Schaeffer recalls. Schaeffer snapped at Murren during one telephone conversation, then regretted it and called Murren back to invite him to his condo again. But this time Schaeffer didn’t invite his friend upstairs. They met in a small conference room by the lobby.
Kerkorian’s offer was set to expire, so Mandalay’s board was called in to consider the $69 bid on Friday. Bankers, attorneys, and other strategists hurried to catch planes from New York and Los Angeles.
Thursday, June 10, 2004
While MGM Mirage’s legal team pulled an all-nighter, Murren drove home to his gated golf-course neighborhood and went to sleep in the huge, carved-wood bed that he and his wife, Heather, had brought back from Spain. When his phone rang at ten thirty that night, Murren reached across Heather’s sleeping form to hear the strident voice of Terry Christensen. Kerkorian’s lawyer argued to insert a safety clause that would allow Kerkorian to back out if the federal antitrust authorities raised a ruckus about Kerkorian’s new control over the Las Vegas casino industry.
Schaeffer had said they wouldn’t consider any escape clause.
At least ask for it, Christensen advised. Murren sleepily agreed.
Friday, June 11, 2004
Schaeffer stopped at Starbucks early that morning for a sugary concoction of chocolate and coffee. A short time later, he entered his office—a lavish, sprawling tan-and-beige suite devoid of family or social photos, but hung with indigenous art from New Zealand, Australia, and the American West.
“Guys, we’re gonna have some big decisions today,” he told the legal team, who were looking oddly funereal.
“Not actually,” responded one of the lawyers.
Mike Ensign walked in. The escape clause that Christensen regarded as prudent looked outrageous to him. Mandalay would be on tenterhooks with a year-long antitrust review, unable to proceed with any development plans.
At this point, Ensign made a great leap of logic. “Kirk got cold feet. They want out,” he told the group. He called the five-bedroom, seven-bath home Kerkorian has maintained since 1992 in the Las Vegas Country Club, a once-tony neighborhood that has lost its cachet as suburbs grew to the west and south.
Kerkorian’s answering machine picked up and Ensign left a message. Terry Lanni was also notably absent, attending Ronald Reagan’s funeral at the invitation of his friend Nancy Reagan.
Schaeffer and Ensign felt silly for asking the board to fly in for nothing. “We were embarrassed,” says Schaeffer. Instead of a sale, Mandalay’s board spent two hours figuring out how to shore up the company’s stock price once news of the dead deal got out. Arbitrageurs were going to sell so fast, it’d be like holding a vacuum to Mandalay’s ballooned stock.
But Ensign was terribly mistaken. Kerkorian had left for Los Angeles and hadn’t received the telephone message. By the time the Las Vegas housekeeper had arrived for work and relayed Ensign’s communication to her boss in California, Mandalay’s board had settled on a new plan: They would turn “The Hotel”—the hipster, boutiquey hotel attached to Mandalay Bay—into an international hotel brand and agreed to announce another casino resort on land just to the south of Mandalay Bay.
Kerkorian did final
ly call Ensign, but he was out of touch with the details of the negotiation and had no idea about the offending clause. His penchant for leaving the minutiae up to his minions nearly killed the whole deal.
“Kirk, these terms don’t seem in keeping with our discussions up to this point,” Ensign said. “Are these the terms you mean?”
“Yes,” Kerkorian replied, trusting that his team had gotten it right.
Glenn Schaeffer didn’t bother to warn MGM Mirage. His gilt tongue worked overtime that afternoon in a series of television and newspaper interviews. “Our offer morphed into an option,” Schaeffer sniped. “It is not in the best interest of Mandalay shareholders to agree to a deal that gives MGM control over whether it closes.”
Kerkorian seemed resigned. “OK, well, it is what it is,” he said calmly. To Murren and Lanni, the public rebuff was a big, humiliating slap in the face—a giant “F-you,” Murren said.
Schaeffer left his sprawling office that evening to pick up Chinese take-out and a glass of Riesling—a grape he was studying because his vintner was raising it in New Zealand. Schaeffer figured Murren would never talk to him again. “I thought he’d say, ‘Fuck you,’” Schaeffer said.
But when his cell phone rang at the restaurant, he couldn’t resist taunting Murren. “Did you see my rocket’s red glare over your bow?” Schaeffer teased.
“You’re a very funny guy,” Murren said. “You’re very clever. Ballsy. I love this ‘morph’ thing. You are the master of the sound bite.”
They laughed awkwardly.
“What’s going on?” Murren asked. “Is there a way to get this done?”
“Yes.”
By evening, MGM’s attorneys suddenly became comfortable with the antitrust risk. Kerkorian was willing to buy Mandalay without caveat, if they could settle on a price.
Saturday, June 12, 2004
In a third secretive meeting at Schaeffer’s Park Towers condominium building, Murren and Schaeffer searched in the dark for a light switch. They felt with their fingers along the walls for the lights, by the building’s wine cellar, and then haggled over price.
Winner Takes All Page 24