Two Way Hard Three | Las Vegas Casino & Design Blog

June 20, 2007

Kerkorian Withdrawing from CityCenter, Bellagio?

Posted by detroit1051

The 6/20/07 WSJ reports that Kerkorian will withdraw his plans to take over Bellagio and CityCenter. Since the original announcement, MGM's share price is up 37%.
Was this only a ploy by Kerkorian and MGM to get the stock moving? Regardless, imo, MGM is still in play to be taken private.

An announcement may also be made today regarding a joint-venture between MGM and Kerzner Inetrnational to develop a multi-billion dollar casino resort on the 40 acres at the Strip and Sahara.
Subscribers to the WSJ can read the story at:
Kerkorian's MGM Plans in Doubt


Read archived comments (13 so far)
June 20, 2007 7:03 AM Posted by Brian Fey

Hum..ah...King Leonard...

MGM Stock is down 10%

Wynn stock is down .30 cents.

Hum...Maybe Kirk figured out, he can't beat the master. Is this the beginning of the end for MGM? Has Wynn now conquered the world?

June 20, 2007 10:25 AM Posted by Tom M

I think this was always just a ploy by Kirkorian. But I am not sure what he is up to. I doubt it was just a play to boost share price. He is either unhappy or probing for some other reason. Any guesses?

June 20, 2007 10:33 AM Posted by mike_ch

Unimpressive all the way around. I'm not even going to bother to comment on the Tracinda thing since it seems only done to manipulate stock values, something I don't care about.

The Kerzner thing, though, is pretty amusing. Everyone 'oohs' and 'aahs' at Atlantis until they actually stay there and find a hotel that's somewhere between middle of the road and mediocore that's simply been themed up

June 20, 2007 10:56 AM Posted by Leonard Stern

Brian: How come I KNEW that YOU would be the very FIRST to comment on this latest development? Right now, MGM is trading lower by 6.75% based on today's announcement. Since Tracinda's official offer to acquire both the Bellagio + CityCenter, even when taking into account today's retreat in share price, Kerkorian has managed to INCREASE the market value of MGM by a whopping 32%+ in only a matter of weeks. Kerkorian is definitely up to something + I can assure you that [his] strategy will exceed that of your "master" whose stock is also trading lower today as well. No one knows what Kerkorian plans on doing, one thing is for certain, it is NO coincidence that Tracinda's announcement to withdraw their offer to purchase Bellagio + CityCenter falls on the SAME DAY that MGM/Mirage announced their joint venture plans with Kerzner In't. to develop their north Strip property. If anything, Kerkorian appears to have made a brilliant timing maneuver when considering the Kerzner deal which will most certainly spike the share price of MGM once the details of the deal are revealed to the general public later. Whatever Kerkorian is up to, I can assure you that it will be a brilliant, if not stellar, positive business move for himself as well as benefit MGM's shareholders at the end of the day. It's now obviously apparent that the Tracinda offer was simply a 'strategic play' in order to drive up MGM's market value significantly + the results have proven to be more successful than expected. On the other hand, the only reason that the WYNN board of directors approved the buyback of shares was to INCREASE a rapidly declining share price, as is the intended result with buybacks in most cases. Well it looks like your "master" has failed miserably since WYNN shares have been on a downward decline ever since the buyback - can you say "backfired"? I beg to differ, perhaps it is Wynn that needs to take a lesson is Dealmaking 101 from Kerkorian. :-)
Yours truly,
"King Leonard the Great" (I have a new title now)

June 20, 2007 12:41 PM Posted by Dave

I'm not that surprised, but I agree with Leonard that ultimately it makes sense for the company to go private.

As far as Atlantis goes, I've never been to the Bahamas resort but I've heard generally positive things about it, and Kerzner's definitely been a pace-setter in the international arena, though his AC gambit didn't amount to much.

I'd hope that they'd brand it as a "One and Only," just because having a resort named after a lost continent doesn't make too much sense in the middle of a desert, particularly since the trend is now towards more sophistication and less theme.

And wasn't "One and Only" a Henry Winkler movie?

June 20, 2007 1:08 PM Posted by mike_ch

Dave: If you read the reports on TripAdvisor, Atlantis is almost all show and no go. On the surface it looks like some sort of marriage between megaresort and Disney theming, but operationally it just doesn't hold up.

I'm betting we see MGM partnering with various outside groups on hotels more and more, though. I have no evidence to this, but I'm expecting them to partner with Cirque on a resort design for the Strip within the next 10 years or so, perhaps as a replacement to Excalibur. Cirque has expressed interest in designing a resort-style destination recently.

June 20, 2007 6:44 PM Posted by Hunter

This is fascinating to me, personally.

I thought the original statement that Tracinda was interested in CC and the B was genius on Kirk's part and even though the stock took a hit today, it's broken out of its slumber as people are realizing that the assets are dramatically undervalued in the market cap.

June 21, 2007 10:30 AM Posted by detroit1051

Very interesting story on Strip Land Values, MGM and joint ventures. Kerkorian rocks!

June 21, 2007 10:50 AM Posted by Leonard Stern

Hunter: Kerkorian has, once again, proven his "uncanny genius" for forward-thinking + timing like no other operator ever. This article in today's SUN clearly demonstrates that he has executed another stroke of genius with MGM/Mirage's long-term potential of developing numerous joint venture mega project deals down the pipeline. The Kerzner collaboration justs scratches the surface of Kerkorian's strategy. It is evident that [he] planned this whole scenario in advance which catapulted their share price + market value overnight. MGM shares are actutally trading up slightly(0.60) at the present time while WYNN is currently continuing its pattern of downward decline, trading down 1.69 + has now fallen below 90. The buyback effort to boost its share price really failed big time, while all that Kerkorian needs to do is make a simple announcement on [his] future plans + overnight the stock soars thru the roof. Brian, who do you really think is the "master" of the two? MGM is still undervalued + its future will only serve its shareholders with unlimited potential because of their diversity, something WYNN cannot offer.

June 21, 2007 1:04 PM Posted by mike_ch

What MGM has going for them is a lot of hotels, and a lot of them that have many rooms. All these hotels that exist to have a lot of rooms, like the Grand, Luxor, Excalibur, TI soon PCC, etc. They're all MGM's. The only big room clusters in town right now they don't control is Caesars and VenetiPalazzo.

As they consolidate all their properties into big PCC centers, they will lose some of their variety as the Monte Carlos and the Circus Circuses make way for more CityCenter/Kerzner style stuff. I'd like to eventually someday see these giant room stuffers like TI and Excalibur become smaller, boutique hotels. It's not all about room count, especially with McCarran and the region's natural resources finding their capacity limits withing visual range.

June 21, 2007 7:44 PM Posted by Christian

Hey it's been a while since I've left a post, but here's my 2 cents.

I think Kerzner would be interesting to see, but its almost like they have relied on their laurels since the "grand" Atlantis. How long has it been open and what have they done since?

Whatever the result is, I take it that this is the reported baby PCC MGM was planning for North Strip. It seems like they have so much on their plate that their resources might be stretched too thin and this project, and others, might not get the nitty-gritty attention developers like Wynn and Adelson can afford.

June 21, 2007 9:43 PM Posted by Devon

This whole story with Kerzner really makes me wonder what brand they will pick. I assume Atlantis will be their choice, only becuase of its massive appeal and brand recognition. But I just don't like the way that they built the Atlantis property in the Bahamas. One of my friends has stayed there, and while it has appeal from the outside, she likens it to the Venetian in terms of a solid build. Kerzner is building another Atlantis project in Dubai, complete with middle-eastern details, so I'd lean towards thinking that we'll see the lost city replace the circus.

Also, do you really think that they'd subject the brand name of One and Only to a 3000 room resort that while luxurious, could never hold up to its sister properties in the caribbean. Maybe they'll develop a boutique One and Only in addition to Atlantis.

Anyone have any other ideas?

June 22, 2007 1:24 PM Posted by Leonard Stern

I already sent this to Brian, but since we're on the topic of MGM's long-term potential since Kerkorian's pull-out announcement, here are the latest analysts' current performance predictions for both MGM + WYNN (sorry all of you Wynn fanbys - Stevie is s l o w l y biting the dust:

CIBC analysts currently reiterate their "Sector Underperform" rating for WYNN.

Wynn Resorts, Ltd. target price has been reduced from $90 to $89/share.

ON THE OTHER HAND, just today CIBC upgraded MGM from Sector Performer to "Sector Outperform" raising MGM's target price from $70 to $98/share. I don't know where many of you guys are acquiring your "figures" from re WYNN, but given my "deficient, seriously handicapped + limited mathematic skills", even I can figure this one out. :-)