Kerkorian

"the meantime, Kerkorian had acquired another piece of Las Ve¬ gas real estate for $5 million. He launched a new company, Interna¬ tional Leisure, to construct the world’s largest casino on the site. Financed through a public offering of 17 percent of International Leisure’s shares, the International was an immediate success. Along the way, Kerkorian bought the Flamingo in order to acquire experienced staff, hired a skilled manager who turned it into a highly profitable in¬ vestment, and decided to keep the casino. By late 1969, Kerkorian was sitting on International Leisure stock worth SI80 million, the fruit of an investment of just SI6.6 million. Adding in his Western Air Lines and MGM holdings, plus other assorted assets, Fortune estimated his total net worth at more than S260 million.16"

"Another key to Kerkorian’s success in trading aircraft was a tech¬ nique he called “keeping the back door open.”11 If he could not resell a new plane at a profit, he might be able to use it in his charter fleet. Fail¬ ing that, he would sell it back to the manufacturer at a previously agreed-upon price. This strategy of maintaining several different op¬ tions was evident in Kerkorian’s later dealings such as the Chrysler affair. It was reminiscent, too, of Laurence Tisch’s hedged approach of leasing the Laurel-in-the-Pines hotel before committing himself to buying it."

"Kerkorian acquired another charter airline in 1947. He named the company Transinternational Airlines and, in 1962, made it the first char¬ ter carrier to buy a jet. That move doubled Kerkorian s military business, but his dreams for further expansion exceeded his capital. He resolved the problem by selling the airline to Studebaker Corporation, while retaining operating control. By capitalizing on the larger company s vastly superior financial resources, he reckoned, he could build Transinternational into a regional powerhouse. The sale price consisted of an initial payment of $ 1 million in stock plus a share of future profits. Kerkorian quickly and successfully put his plan into action, collecting an additional SI*7 million of Studebaker shares in the process. After just two years, Studebaker rethought the wis¬ dom of being in the airline business and sold the operation back to Kerkorian and his associates for S2.5 million. By 1965, charter airlines were in a phase of rapid growth. Capital¬ izing on the boom, Kerkorian took Transinternational public. At the initial offering price, his shares were worth roughly S7 million. The huge gain in a year’s time, however, was just a hint of what was to come. In 1968, Kerkorian sold Transinternational to Transamerica Corporation for stock. The sale price for the entire company, of which Kerkorian held 58 percent, was $148.3 million. The following year, Kerkorian liquidated the last of his Transamerica stock, realizing SI04 million, all told.14"

"Kerkorian Takes Off With World War II on the way, Kerkorian became a civilian pilot for the British Royal Air Force, ferrying bombers from Canada to England and Scotland. At long last he was earning good pay for his efforts, to the tune of $1,000 a month (about $10,000 in 1999 dollars), tax-free. In the process, he set a new speed record for the North Atlantic run from Labrador. Out of his wartime earnings and poker winnings, Kerkorian man¬ aged to save $12,000. Combining that grubstake with a $5,000 invest¬ ment by his sister, he went into the business of buying and selling surplus military planes. Initially, the operation consisted of purchasing DC-3s in Hawaii, flying them to the mainland, and converting the planes into com¬ mercial aircraft. Conceptually, the business was not much different from his earlier one of repairing and selling used cars, but the money was con¬ siderably better. Planes that cost him only $7,000 to $10,000 fetched as much as $60,000."

"By now, the pace of Kerkorian’s deal making was accelerating and the numbers were escalating. In 1955, correctly foreseeing the coming pros¬ perity of Las Vegas, he invested $50,000 in a hotel in that city. His tim¬ ing was off, however. Hotel expansion had temporarily gotten ahead of growth in gambling and Kerkorian lost his investment. He resolved not to invest thereafter in a business he did not run, but remained con vinced of the city’s bright future. In 1962, he paid $960,000 for 40 va¬ cant acres across the Las Vegas Strip from the Flamingo hotel and casino.15 The investment paid off in spades when the property became the site of Caesars Palace in 1996. Kerkorian collected $4 million per annum in rent for two years, then sold the property to the hotel-casino’s owners for $5 million."

"A generally favorable Forbes 1997 article contended that Kerkorian had never preyed on companies, in the customary sense of “pressing every advantage, picking every bone clean.”26 The author further argued that he had not taken advantage of minority shareholders. According to an unnamed executive, who was otherwise critical of Kerkorian’s man¬ agement of MGM, “If you invested with Kirk, you had every advantage he did.”27"

"He disclaimed any unique timing ability, however, saying that it was simply a matter of not holding out for the peak price. “It’s just that I don’t try to get all the meat off the bone,” Kerkorian explained. “When I get a good figure, I just move something.”10"

"Kerkorian had very few words for anyone about anything, and what words he used were monosyllabic. He was always direct and clear, and could be counted on to live up to his word. While he was extremely charitable, his contributions were always anonymous. He was an economic adventurer, the true essence of a high-wire industrial gambler. At that time, he had recently opened the biggest hotel in the history of Las Vegas, the MGM Grand, which had gone violently over budget. Everything was going wrong for him when he walked into Bob Evans’s house to meet with Charlie Bluhdorn and Lew Wasserman and… um… me. Kerkorian’s hope of making a deal with Paramount and Universal was his last gasp at averting bankruptcy. MGM owned lots of assets outside the United States and had a first-rate worldwide distribution company, but like Paramount it didn’t have enough pictures to support it. Some years earlier, Charlie had persuaded Wasserman to combine the separate international distribution operations of Paramount and Universal into one company serving both. The idea pitched to Kerkorian was to join the distribution venture and sell some of the theaters MGM owned to raise cash for his hotel."

"I watched the absurdity of these titans frozen in their positions. Slowly Charlie inched his way around to Kerkorian’s window, his hands up in surrender and apology. He shouted acceptance of Kerkorian’s price. Kerkorian simply nodded and drove off. Meanwhile, Wasserman shrugged and got in his car. A distraught Charlie walked back into the house saying, “I’m starving, I’m starving—bring on the hot dogs.” *Oh my god,* I thought, *I am so over my head.*"