Few people have been involved with ownership of casinos longer than reclusive billionaire Kirk Kerkorian. As an investor in Las Vegas, Kerkorian pioneered the mega-resort, when he built in 1967 what was at the time the largest casino in Las Vegas, the International (now the Las Vegas Hilton).

Last month, the 89-year-old Kerkorian set in motion a financial and operating model that may change the gaming industry almost as profoundly as the mega-resort. Kerkorian’s investment company, the Tracinda Corporation, informed MGM Mirage that it wanted to buy company’s two premier properties, Bellagio and the under-construction CityCenter on the Las Vegas Strip. The purchase would trigger a variety of possible scenarios, all which seem to be looked upon favorably by Wall Street analysts.

Kerkorian, who owns 56.3 percent of MGM Mirage, could accomplish his goal of owning the two properties by trading equity to the company, but according to a filing by Tracinda, he has more than a simple asset purchase in mind.

In addition to the purchase, a Tracinda release said, “it also wishes to pursue strategic alternatives with respect to its investment in MGM Mirage which may include financial restructuring transactions involving all or a substantial portion of the remainder of the company.”

What that means to MGM Mirage isn’t entirely clear, but the company said it was setting up a “transaction committee” consisting of members of the board of directors from outside the company.

Terry Lanni, chairman and CEO of MGM Mirage, told Casino Connection that the committee will begin negotiations with Tracinda at some point in the near future, but no timeline had been set.

Some of the options speculated for a future MGM Mirage are taking the company private (not completely likely since company officials had previously stated that they like the accountability and visibility of a public company); selling many assets and transitioning into a management company that would get paid by managing the properties; acquisition of other casino companies; build more resorts with the capital gained by the sale of Bellagio and CityCenter; and several other options..

By Roger Gros

Roger Gros is publisher of Casino Connection and editor and publisher of Global Gaming Business magazine, the industry’s leading gaming trade publication. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its third edition. Gros was named “Businessman of the Year” for 1998 by the Greater Atlantic City Chamber of Commerce.

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