Potential Buyer Seeks Casinos, Kerkorian Says
Financier Kirk Kerkorian, who a month ago proposed to buy the 30% of MGM Grand Hotels stock that he doesn’t already own, disclosed Wednesday that he has been approached by a prospective buyer of the company’s two Nevada gambling resorts.
The identity of the potential buyer was not revealed.
A spokesman for Kerkorian said the financier intends to proceed with his offer of $18 cash, or $126 million, for the publicly held MGM Grand shares but would “seriously reconsider” in the event of a sale or transaction “significantly more advantageous” to all the shareholders.
Invitation to Bid
Some Wall Street observers interpreted the brief statement as an invitation for others to bid on the MGM Grand hotels in Las Vegas and Reno. The company’s stock closed at a 52-week high of $17.625 in composite trading Wednesday, up 37.5 cents for the day on heavier-than-normal volume.
A number of existing casino operators in Nevada and Atlantic City, N.J., and hotel firms without casinos are considered financially able to take on such a purchase. The regulatory climate in Nevada is considered more favorable to licensing than in New Jersey, one casino analyst noted.
The Kerkorian statement pointed out that, in connection with the reported approach for its properties, the MGM Grand name itself would remain with its present stockholders.
That presumably would leave Kerkorian free to use it in the future for other casinos that he might buy or build.
Kerkorian built and opened the MGM Grand Hotel in Las Vegas in December, 1973, after selling the former International Hotel there to his partner in that operation, Hilton Hotels, which renamed it the Hilton Las Vegas. In 1978, he opened the MGM Grand Hotel in Reno.
However, observers could not recall the reporting of an acquisition approach for the MGM Grand before the one reported Wednesday.
Kerkorian’s spokesman, Stephen D. Silbert of the Wyman, Bautzer, Rothman, Kuchel & Silbert law firm here, said in reporting the approach that “we have always taken actions which we believed were best for MGM Grand’s shareholders as a whole.”
Disclosure of the approach by a potential buyer of MGM Grand properties was included in a company release reporting that a special committee of its board has hired the investment firm of Bear, Stearns to advise it concerning the fairness of Kerkorian’s proposal to the public shareholders.
Several analysts and industry officials said they did not know who might have made the approach to Kerkorian. One speculated that it might be Drexel Burnham Lambert, New York investment bankers for some of the major casino firms, including MGM Grand.
Daniel Lee, a casino analyst at Drexel Burnham, would not say whether he knew the origin of the approach but listed some with resources sufficient to bid for the MGM Grand properties if they choose to do so as including:
Resorts International, which has a casino in Atlantic City but none in Nevada; Hilton Hotels, which has two Las Vegas hotel-casinos but, because of licensing difficulties, recently sold its Atlantic City casino before it could open it; Golden Nugget, which has casinos in Las Vegas and Atlantic City but none in Reno; Caesars World, which also has casinos in Las Vegas and Atlantic City, and the Pritzker family of Chicago, owners of Hyatt Hotels and a controlling interest in Elsinore, a Las Vegas casino operator.
Lee said that, if Kerkorian sold the hotels, he could “maybe build a big new one--who knows, he’s an unpredictable guy.”
Two other analysts agreed with Lee that Kerkorian is a trader who is “always open to price.”
Called a ‘Trader’
“Kerk Kerkorian is a trader,” said Mario Gabelli, research director at Gabelli & Co., a New York brokerage firm. “He’ll buy and sell anything.”
Gabelli said MGM Grand is a well-run firm and said he believes that the two hotels are worth the equivalent of at least $26 or $27 a share. He added that his firm manages accounts that hold more than 800,000 shares of MGM Grand.
Dennis Forst, vice president of Seidler Amdec Securities, Los Angeles, who said the MGM Grand assets are worth more than $18 a share, also called Kerkorian a trader and said he would sell anything if someone made “a good enough offer.”
Analyst Lee Isgur of Paine Webber, another New York brokerage house, noted that MGM Grand could be particularly attractive to prospective buyers now because it recently won a favorable settlement on litigation over insurance reimbursement on its disastrous Las Vegas fire that killed 85 and injured more than 200 in November, 1980.
Also, he said, someone seeking a casino might find it easier to deal with MGM Grand “because one person controls it.”
In addition to MGM Grand Hotels, Kerkorian also is the majority stockholder in the Culver City-based movie company MGM/UA Entertainment Corp. That company has been studying “various proposals” that include the possible restructuring of the firm and selling one or both of its movie studio subsidiaries, MGM and United Artists.
Lee said the MGM/UA situation has “no relevance” to a Kerkorian decision on MGM Grand Hotels because he could obtain funds for MGM/UA irrespective of what he does with the casino holdings.
