Kerkorian & MGM: big questions

The huge news over the past 24 hours (as of 2 p.m.) is Kirk Kerkorian’s apparent big to buy the Bellagio and CityCenter from MGM Mirage. Here’s a NYT take:

What is Kirk Kerkorian up to now?

That is what industry observers, analysts and DealBook were left wondering after the 89-year-old billionaire financier said that his holding company, the Tracinda Corporation, intended to enter into negotiations with MGM Mirage to buy the Bellagio, the Las Vegas casino-hotel where Mr. Kerkorian stays when he’s in town, as well as the partly built CityCenter, another Las Vegas property that many consider the most expensive privately financed project in American history.

The New York Times described Mr. Kerkorian’s brief statement as “opaque”; The Los Angeles Times called his latest move “puzzling.” What made the move confusing was that, in a sense, Mr. Kerkorian is bidding to buy the two properties largely from himself. He is the majority stakeholder in MGM — which owns, in addition to the Bellagio and CityCenter, the MGM Grand, the Mirage, Luxor, Mandalay Bay and New York New York, all in Las Vegas, among other properties. The final price tag for the two properties, analysts said, could exceed $12 billion.

Harrah’s Entertainment and other casino operators have recently agreed to go private, so there is some momentum that Mr. Kerkorian could be hoping to build upon. “I don’t know what his motivation would be,” David Schwartz, director of Center for Gaming Research at the University of Nevada Las Vegas told The Los Angeles Times, “but it is part of a trend and so it does make a lot of sense in that respect.”

Kerkorians Vegas Moves Ignite Talk of MGM Deal

Look who got quoted in the last paragraph there. I also told the reporter that Kerkorian didn’t get to where he was by being a bad investor, which makes it clear that I’m not second-guessing Kirk there.

That being said, there are some big questions. First, is Kerkorian going to take these two “assets” private and sell off his MGM stock? That’s one scenario. Second, is this an opening gambit for the billionaire to take the whole company private? That makes more sense to me, but I’m not in the boardroom, so I can only speculate. Third, if the company is divided up, what happens to the management team? Would PCC & Bellagio be worth as much without Terry Lanni and Jim Murren? I don’t know, and I think that people throughout the industry are equally at a loss.

Spread the love