On the eve of Steve Wynn’s resignation as chairman and chief executive of Mirage Resorts Inc., Advance Publications Inc.’s chairman S.I. Newhouse Jr. boarded his corporate jet en route to Las Vegas. When he arrived, he would share Mr. Wynn’s last supper at the Picasso restaurant in Mirage’s crown jewel, the Bellagio Resort on the Strip. Also at the table would be art dealer Larry Gagosian, who, at Mr. Newhouse’s request, had followed the publisher west.
Sources close to Mr. Gagosian said that the meeting had been called by Mr. Newhouse to discuss the future of key artworks in Mirage’s $400 million collection–accumulated by Mr. Wynn, controlled by Mirage and showcased in the Bellagio–considering that the company was in the process of being acquired by rival Kirk Kerkorian’s MGM Grand Inc. Several New York dealers told The Observer that Mr. Newhouse would likely have been trying to lay the groundwork for capturing the 1942 Picasso oil painting, Portrait of Dora Maar , one of Mr. Wynn’s most prized possessions, which he acquired in 1997.
“Gagosian is Newhouse’s middle man of choice and the [increased] activity at [the Gagosian gallery] has been palpable since Kerkorian consumed Wynn,” said one dealer.
For at least the past five years, Mr. Gagosian has brokered deals between the two men who share a passion for collecting masterpieces at almost any price–Mr. Newhouse very privately, Mr. Wynn very publicly. “Wynn has poached extensively from Newhouse’s collection for the Bellagio,” said a SoHo gallery owner.
These matters almost never happen face to face. In a May 1998, Sotheby’s auction, the two chief executives unwittingly engaged in a bidding duel–while on separate telephones–for one of Andy Warhol’s iconic images of Marilyn Monroe, Orange Marilyn (1964). When the auctioneer announced a final sale for $17.3 million, four times the previous record for a Warhol, the audience in the salesroom exploded into a riotous round of applause. Mr. Newhouse celebrated quietly.
But, sources say, Mr. Newhouse arranged the unusual tête-à-tête with his sometime rival because he had become aware of an extremely privileged arrangement between Mr. Wynn and MGM, which announced on March 3 that it would acquire Mirage for $6.4 billion. Mirage currently owns outright half the Bellagio collection–as it is called–and leases the other half from Mr. Wynn for $5 million per year. According to S.E.C. filings on the acquisition, in addition to a golden parachute deal and the continued income of the lease, Mr. Wynn will have the right of first refusal on all sales of works from the Bellagio collection for the first five years after the acquisition goes through.
For Mr. Wynn, the deal gets even sweeter. A clause in the agreement specifies that if he chooses to exercise his right of first refusal, he can either pay an appraisal price set by Christie’s International or Sotheby’s Holdings Inc., or a pre-established price based on Mirage’s valuation of the piece, even if the price is lower than an offer made by another party.
In other words, the cozy agreement creates the potential for Mr. Wynn to purchase these masterworks at below-market prices–and sell them again to interested parties like Mr. Newhouse.
The afternoon after his art world power dinner, Mr. Wynn appeared at the Mirage Resorts’ annual shareholders meeting and announced that he was stepping down in view of MGM’s takeover. He confidently told those present that MGM company chairman Terry Lanni has promised that for the time being the Bellagio collection will remain intact.
But a more accurate pronouncement would have been that while MGM does recognize the branding value of the Bellagio collection–it attracts almost 2,000 visitors a day, which at $12 a pop generates enough income to cover its operating expenses–there is the suggestion that the company would be interested in selling at least portions of the Bellagio collection. Mirage came with $2 billion in debt that the Mirage carries which a dozen or so select works might easily erase.
After Mr. Wynn’s speech, which included a battle cry for keeping the Bellagio a cut above Mr. Kerkorian’s mass-market gambling meccas, several shareholders climbed to microphones to rhapsodize about Mr. Wynn’s tenure. Others mobbed the developer for his autograph. To many present, the meeting seemed more like a tribute to Wynn than what it actually was: a final public acknowledgement that his glitzy excesses and fatal decision to build the Beaux Rivage Casino in Biloxi, Miss. had failed to protect the company’s stock from predatory investors.
But not all shareholders were swept up in this premature outpouring of nostalgia for Mirage Resort’s Wynn era–especially after they became aware of the same information Mr. Newhouse had stumbled upon. On March 28, less than a week after the strangely celebratory shareholder meeting, five parties including an investment consortium called Crandon Capital Partners, filed suit in Clark County District Court to stall what they presumed to be the inevitable sale of a large portion of the Bellagio collection to Steve Wynn at a bargain basement price. The suit accuses Mr. Wynn of using his influence to “structure his deal at the expense of Mirage shareholders,” and the Mirage board members of failing in their fiduciary duty to maximize shareholder value when they agreed to the deal. The shareholders are seeking a court order forcing Mirage to “seriously consider all bona fide offers for Mirage’s assets and to conduct fair and active bidding procedures.”
Mr. Wynn’s Las Vegas attorney, Mark Tratos said neither he nor his client could comment on the future of the Bellagio collection at this time because of its possible effect on the price of Mirage stock.
Mirage Resort’s spokesman, Alan Feldman, found the suit dubious, hypothetical and, above all, premature. He said the suit is based on the agreement for the transfer of art if and when a bidder should present itself, and that Mirage “will let the lawyers review the case and they will respond to it with the proper procedures in court.”
Bear Stearns & Company vice president of Equity Research, Marc J. Falcone, said the true financial complication with the sale of works from the Bellagio collection is that “Steve Wynn often sells off pieces from the collection to help finance new acquisitions, so with half the art nobody knows which individual art piece belongs to Mr. Wynn and which to Mirage.”
This is not the first time Wynn’s wheeling and dealing of the Bellagio collection has, to put it kindly, generated spirited debate. In recent years, Wynn came under fire first for dedicating disproportionate amounts of Mirage’s resources to purchasing art, then for unloading Mirage stock to finance further acquisitions for his personal collection. He also miraculously convinced the Nevada state legislature to enact a tax break on publicly displayed art, created explicitly for his financial benefit.
“Wynn is passionate about art. He thinks it’s a better investment than the market,” said Prudential Securities Senior Gaming and Lodging Analyst, Joe Coccimiglio.
At least for a time, he was also extremely passionate about the alluring Portrait of Dora Maar that prompted Mr. Newhouse’s visit to Las Vegas. After purchasing the work from his first art world mentor, the New York dealer Bill Acquavella, Mr. Wynn stopped collecting Impressionist works and focused for a time exclusively on Picassos. He collected dozens of paintings by the artist, and more than 40 of his ceramics. He later bid on a celebrated Picasso portrait from the Ganz estate, Dream , although he lost it to another collector who paid $48.4 million for the piece in November of 1997. Mr. Wynn even commissioned the painter’s son, Claude Picasso, to design the furniture and carpets for the Bellagio restaurant that bears his father’s name.
Perhaps it is only fitting that Mr. Wynn, at this stage, would finally consider letting go of his former muse, as he leaves behind his empire and the hotel he built as a shrine to the best of everything.
Maybe he’ll find another muse. “I wouldn’t be surprised if he bought Sotheby’s,” said Mr. Coccimiglio. “If he could find a way to take it private.”