MGM Grand Plans Hollywood Theme Park in Las Vegas
With the ink scarcely dry on Kirk Kerkorian’s deal to sell his 82%-controlled MGM/UA Communications Co., the financier announced that his 98%-owned MGM Grand Inc. plans to build a movie theme park and new hotel in Las Vegas.
The news sent a ripple through Hollywood, because two larger entertainment companies--Walt Disney Co. and MCA Inc.--have committed over $1 billion to similarly themed attractions in central Florida, with talk of competing in Europe as well.
To further complicate matters, the MGM name already appears on the Disney tour in Florida, under a 4-year-old agreement that was unsuccessfully challenged by MGM/UA last year in California state court. While that decision is on appeal, MGM Grand disclosed Tuesday that it has sued Disney in a Nevada state court to establish its right to use the MGM Grand name on theme parks.
At least one analyst expressed skepticism that Kerkorian is firmly committed to the theme park undertaking. “Kirk’s a very bright guy,” the analyst said, speaking on the condition that he not be identified. “He does things like this constantly. He throws things out just to see what the reaction is.”
Bought Desert Inn
No immediate reaction could be registered on Wall Street, however, since the announcement was made after the close of the stock markets. MGM Grand, which is traded over the counter, ended the day at $17 a share, with no change in price.
MGM Grand, organized three years ago, launched a posh airline offering service between New York and Los Angeles in 1987 and bought the Desert Inn the following year, along with adjacent undeveloped property in Las Vegas.
The company announced Tuesday that it has agreed to pay $28 million for 143 acres of land on the Desert Inn site, which it presently leases, to provide a possible site for the 4,000-room hotel and entertainment complex.
MGM Grand has previously disclosed plans to raise about $120 million in a stock offering which would reduce Kerkorian’s stake in the company to about 77%. The company intends to proceed with that offering once it clears the Securities and Exchange Commission, MGM Grand Chairman and Chief Executive Fred Benninger said Tuesday.
Benninger acknowledged that the company has not yet drawn up plans for its entertainment complex, and he said the company has not enlisted a partner.
‘Seems Like Lunacy’
But a source at MCA said that company has engaged in preliminary discussions with Kerkorian about “possible participation” in the venture.
Analysts were divided about a movie tour’s chances of success in gambling-oriented Las Vegas. “There’s desert all around. There’s no (large) population base. That seems like lunacy,” one entertainment industry analyst declared privately.
But Harold Vogel, Merrill Lynch’s veteran analyst, said: “Vegas has been evolving to a more family-oriented business, and this, I think, is a natural extension of the destination resort concept. I think a lot of people bring their family and don’t know what to do with their family while they go while they go gambling.”
(Vogel noted that Merrill Lynch has served as Kerkorian’s adviser, so he declined to talk about MGM Grand’s specific plan.)
With Kerkorian’s agreement last Friday to sell MGM/UA Communications to the Australian Qintex Group for $1.5 billion, the 72-year-old financier appeared ready to relinquish his 20-year-old hold on the beloved MGM name and logo. At the time, however, the buyer and seller agreed that MGM Grand would enjoy certain licensing rights to the MGM Grand name.
No Lawsuit Seen
In its California lawsuit, MGM/UA argued that Disney had no right to use the name on its movie and television production facility in Florida, which opened months before the actual tour. MGM/UA also opposed the construction of hotels adjacent to the Disney tour, arguing--again unsuccessfully--that MGM Grand has exclusive rights to the MGM name on hotels. The decision has been appealed, said Skip Miller, the Los Angeles attorney who is handling both the California and Nevada cases for Kerkorian.
No lawsuit over the theme park name is anticipated by Qintex, according to Kevin Wallace, Qintex America’s chief financial officer. “We’ve worked out a special agreement (for) the use of the MGM Grand name and the stylized lion logo, which is a different lion (from the Metro-Goldwyn-Mayer lion familiar to movie-goers) . . . for use in the theme parks and hotels,” Wallace said.
