BizReport
Sept 15 2004
Kerkorian and MGM, Off Again
On Monday, Kirk Kerkorian sold Metro-Goldwyn-Mayer Inc. for the third
time. As a Hollywood reconciliation story, that means Kerkorian has
bought and sold the venerable movie studio more times than Elizabeth
Taylor married Richard Burton.
by Frank Ahrens
The 87-year-old billionaire has been many things in his life:
streetwise boyhood sharpie, wiry pug boxer, daring World War II
pilot, airline chief, Las Vegas casino owner, friend of Hollywood’s
Rat Pack and movie studio mogul. Now, he returns his full attention
to Vegas, where he is merging his MGM Mirage casino with Mandalay
Resort Group in a $7.9 billion deal, giving him control of half of
the action on the Strip.
Kirk Kerkorian is listed by Forbes magazine as the 65th-richest
person in the world. (Mike Mergen — Bloomberg News)
Why has he lobbed the MGM back and forth like a tennis ball in his
beloved game, which he still plays often and at which he beats
younger opponents? It has less to do with sentimentality and more to
do with situational dealmaking and targets of opportunity, which have
defined Kerkorian’s career, say those who have worked with him.
Asked to explain his on-again, off-again love affair with the studio
known for its roaring lion logo, Terry N. Christensen — who met
Kerkorian when he was buying MGM for the first time in 1969 and has
been his personal lawyer for many years since — paused, laughed and
said, “You could ask me a lot of questions, but that’s one I can’t
answer.”
Is it the storied history of the studio, which produced the “The
Wizard of Oz,” “Ben-Hur” and the “Tarzan” films? Unlikely, since MGM
held a fire sale on Kerkorian’s watch in 1970, selling its studio lot
and many props, including Dorothy’s ruby slippers.
Is it the access to Hollywood’s glam life? Probably not. He is known
for his lack of pretense. When MGM’s “A Fish Called Wanda” came out,
Kerkorian told studio head Alan Ladd Jr. that he enjoyed the movie
even though he was twice turned away from sold-out theaters. “Kirk,
we’d show it to you anytime you want to see it,” a flabbergasted Ladd
told Kerkorian. “Oh, no, no. I wouldn’t do that,” Ladd said Kerkorian
replied.
Instead, Kerkorian has treated the famous studio as he has every
other property he’s owned — as a business asset he buys low with the
intention of building, but will sell high at the right price.
Kerkorian acquired the studio for the third time at auction in 1996,
when it was hemorrhaging millions. He transferred Alex Yemenidjian —
who was buying and selling companies for Tracinda Corp., Kerkorian’s
holding company — from Las Vegas to Hollywood and told him to fix
MGM. Yemenidjian hired Christopher J. McGurk from Universal Pictures
to run the finances.
Kerkorian picked the right time to re-enter the movie business. The
media sector was surging. By 1999, MGM reported its first profit in
11 years. Time Inc. and Warner Bros. merged. In 2000, AOL bought Time
Warner Inc. Shortly after, Vivendi and Universal combined. Kerkorian
and Yemenidjian expanded MGM, adding distribution and co-production
deals with other studios, buying a piece of a cable company,
launching cable television channels overseas and hitting Broadway
with shows featuring MGM characters.
One year ago, MGM thought it was about to add the missing piece to
its plan — Universal’s movie and television studios and cable
channels, which failing conglomerate Vivendi Universal SA was selling
off. But at the last minute, General Electric Co.’s NBC swooped in
and stole the prize.
Stifled in their attempt to grow big enough to rival giants such as
Time Warner and the Walt Disney Co., Kerkorian and Yemenidjian looked
elsewhere. “We found ourselves with the ability to do an acquisition,
but there was nothing to buy,” Yemenidjian said.
MGM’s high-cash bid for Universal, a sign of its solvency, was like
bait for other companies. Time Warner, Sony Corp. and NBC all
expressed interest in the studio and its 4,000-film library, the
industry’s largest, a perpetual treasure trove of DVD sales, which
includes the James Bond and Pink Panther series. Kerkorian wasn’t
looking to sell, Yemenidjian and others said, but the time was
propitious and he recognized it.
So Kerkorian put MGM on the market, and Sony snatched it for $2.9
billion. Kerkorian’s team paid $1.3 billion for the studio in 1996;
his cut alone from the Sony sale is worth more than $1.7 billion.
He now turns his attention back to Vegas, which he discovered in
1947, ferrying California celebrities and gamblers back and forth to
Los Angeles on his self-funded Los Angeles Air Service. Kerkorian is
revered in aviation circles; he flew bombers from Canada to Europe
during World War II and hunted salvage planes and resold them after
the war. In 1965, he took his growing airline public; a few years
later, he sold to TransAmerica Corp. for $100 million. He began
building casinos, becoming a friend of Cary Grant, Frank Sinatra,
Dean Martin and other Vegas headliners.
Kerkorian’s scrappy business style — honed from a variety of jobs as
a poor Los Angeles youth, up through his career as a bouncer and
boxer — is described as simple and straightforward.
“He is utterly stand-up,” said Barry Diller, chairman of
IAC/InterActiveCorp and a director of The Washington Post Co. “I
would take a commitment from him without a piece of paper and truly
count on it.”
If he has a blind spot in his business acumen, however, it may be
expecting the same from those he has employed.
“I think he does give discretion and leeway to senior management,”
said Christensen. “If you’re not micromanaging those people, they do
have the opportunity to take advantage of you. . . . These things
happen in Hollywood.”
Poor MGM performance during Kerkorian’s second run, from 1986-90,
spurred his decision to sell the studio for a second time and buy a
big chunk of Chrysler.
Though Kerkorian lives in Beverly Hills, Vegas may be his spiritual
home.
Kerkorian does not gamble in his casinos, but when he wagers
elsewhere, he tends to be a one-off gambler, say those who have seen
him but declined to be identified so not to draw the billionaire’s
ire. They say he will not sit at a blackjack or craps table for
hours. Instead, he will walk by a gaming table, place one large bet
and, win or lose, walk away.
As he has for more than three decades, Kerkorian declined to comment.
The world’s 65th-richest person — worth $6 billion, according to
Forbes magazine — is not reclusive but private, say friends and
associates.
“What does he need the press for?” asked Jerry Weintraub, MGM’s chief
executive in the mid-1980s and now a producer. “Me, I need the press.
I sell product.” Weintraub said he called Kerkorian to ask permission
to be interviewed for this story; even though Kerkorian will not
speak on the record, he is not uninvolved in the formation of his
public image.
When Variety editor Peter Bart was finishing his manuscript of “Fade
Out: The Calamitous Final Days of MGM,” which came out in 1990, he
received a call during an island vacation. It was Kerkorian on the
line. Though Kerkorian would not be quoted for the book, he told Bart
that he would be happy to review the manuscript and offer
suggestions, which he did, Bart said, relating the story last summer
in Los Angeles.
Kerkorian’s aversion to the press hasn’t kept his private life
completely out of the public eye. In 1999, he went through a
nasty-even-by-Hollywood-standards divorce from his third wife, Lisa
Bonder, a former tennis pro 49 years his junior. (His first marriage
lasted 10 years; his second, to a Vegas showgirl, lasted 29 and
produced two children, Tracy and Linda, whose names he combined to
create his company name — Tracinda. His charity is called the Lincy
Foundation.)
Details of the marriage played out publicly through thousands of
pages of court filings and testimony, offering up irresistible and
embarrassing details that included sperm counts, a child Bonder
falsely claimed Kerkorian fathered and her demands for child support
— $320,000 per month. Kerkorian settled with Bonder for $50,000 a
month in child support.
Less public is his charitable work. Following the devastating 1988
earthquake in Armenia, where Kerkorian’s parents were born, he began
sending one cargo jet per month of medical and other supplies, a
practice he continues. His foundation recently gave a $200 million
grant to repair infrastructure in the capital city of Yerevan and
build 3,800 homes. He refuses to have his foundation’s recipients
name buildings for him.
Kerkorian can be personally generous, as well, Ladd said.
“He’ll tip the maitre d’ $100 for a check that was $50,” said Ladd,
who is suing MGM for a percentage of the adjusted gross income of the
three most recent Bond films.
Now Kerkorian is focused on Vegas. But is it too much of a young
man’s town for an 87-year-old? Doubtful, Yemenidjian said.
“I think his genes are better than yours or mine,” he said.