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Steve Wynn's Full House


People: INVESTORS

STEVE WYNN'S FULL HOUSE

Movies, fast food--you name it, he's bet on it

In the high-stakes Las Vegas world of $10,000 baccarat hands and $30 million credit, no one wagers more than Stephen A. Wynn. The son of a compulsive gambler, Wynn blew into town three decades ago with $45,000 in family money. Today, after wagering $1 billion that he could redefine Sin City by blending gambling and unprecedented glitz, the 54-year-old chairman of Mirage Resorts Inc. is the high-profile head of what may be the most powerful company in the casino industry.

Less well known are the unlikely places Mirage's boss is laying his bets these days--on entrepreneurs, takeover targets, and distressed companies. Working a network of bankers, show-business figures, and corporate biggies, the casino king has invested in interactive companies, movie studios, and restaurants--and along the way, he has had both winners and losers (table). Wynn shrugs off the idea that playing the market is his way of playing the odds. "It's hardly gambling, and there's no real strategy here," he says. "If I'm betting, I'm betting on good people with good ideas."

GOOD TUNES. Personal connections figure in many of his deals. Take Activision Inc. Back in 1983, Wynn was sweet-talking Dallas high-rollers at the Cattle Baron's Ball when he was buttonholed by Robert A. Kotick, a 20-year-old student bent on launching a computer-game company. Intrigued--Wynn says he initially viewed Kotick as "a potential son-in-law"--Wynn flew Kotick to New York on his corporate jet and wound up sinking $125,000 into his startup. That company flopped, but Wynn has put $1.55 million into a successor and now owns nearly 7% of Kotick's Activision, the maker of such hit games as Return to Zork and Radical Rex. His stake is worth $13.5 million--and that's after he unloaded $8.2 million worth of stock last fall.

Wynn has been a far from passive investor, says Kotick. When Kotick's first company was making games for Warner Communications Inc.'s Atari Games unit, Wynn arranged for the young entrepreneur to have dinner with Warner Chairman Steve Ross, who was in Vegas for an electronics-industry trade show. More recently, he arranged for Kotick to pitch game ideas to Steven Spielberg and Arnold Schwarzenegger.

Wynn first met Larry Flax, the co-founder of California Pizza Kitchen Inc., at a Los Angeles fund-raiser in 1988 because Wynn had known Flax's date, crooner Wayne Newton's ex-wife, for years. After a second meeting, Wynn paid $250,000 for 1% of the gourmet pizza chain. When PepsiCo Inc. bought half of the company four years later, his stake was valued at $1.4 million, and it has since jumped to an estimated $2 million.

Wynn says he invested in DMX Inc.--a satellite-delivered music service that's 30%-owned by cable giant Tele-Communications Inc.--because it was started by the former manager of singer Kenny Rogers, a longtime friend. Wynn, whose 11.4% stake is worth some $11.3 million, sits on DMX's board. And Wynn paid $50,000 for 5% of Dive!, a gourmet submarine shop in Vegas backed by Spielberg and Jeffrey Katzenberg, because he knows the movie moguls from the L.A. fund-raising circuit and because Katzenberg is a fan of the Mirage's venerable magic act, Siegfried and Roy.

With $3.75 million in salary and bonus and a $677 million stake in Mirage, Wynn can afford to help friends and acquaintances get set up in business. But it wasn't always that way. In 1963, when he was a senior at the University of Pennsylvania, his father died and left him the family business, a legal bingo operation on Maryland's Eastern Shore. In 1967, he bought 3% of the Frontier Hotel & Gambling Hall in Las Vegas and became its slot manager. There he was befriended by legendary banker E. Parry Thomas, who helped him buy several pieces of land in 1971, including a $1.1 million parcel owned by Howard Hughes, which he sold to Caesar's World Inc. 10 months later for $2.25 million.

Then 31, Wynn used the windfall to start buying into the Golden Nugget, a second-rate player off the Strip. In 1973, a group including Wynn bought a controlling interest, and he was named CEO. In 1979, he became the first junk-bond client of Drexel Burnham Lambert Inc.'s Michael R. Milken, who helped him raise $160 million to build a casino in Atlantic City that was sold to Bally Manufacturing Corp. in 1987. Milken later arranged much of the financing for the $700 million flagship Mirage, known for its fire-belching volcano.

Dealing with Milken gave Wynn an appetite for the 1980s takeover binge. Using Golden Nugget funds, he made an aborted bid for 27% of Hilton Hotels Corp. He purchased a 6% stake in Caesar's--and walked away with $6 million when the stock jumped. In 1984, he purchased 4.9% of MCA Inc., getting out with $11 million in profit when MCA Chairman Lew R. Wasserman said he would fight any takeover bid.

Milken's MCA deals with Ivan F. Boesky eventually became a key part of the federal case against Milken, but Wynn, who had sold Golden Nugget's stake earlier, wasn't implicated. He suffered one of his biggest losses--he won't say how much--investing on his own behalf with another Milken client, Saul P. Steinberg's Reliance Capital, which ventured first into insurance and then into Spanish-language TV stations. "We made a lot of money with the insurance company," he recalls. "But they got into TV stuff--bye-bye."

Wynn's zeal for the deal was undiminished. In 1992 and 1993, he personally bought 9.5% of Republic Pictures Corp., and when Blockbuster Entertainment Corp. took over Republic in late 1993, he made $1.2 million. Wynn, who bought nearly half his shares on margin, claims he didn't know a buyout was coming--that he bought in because Republic was run by a son-in-law of Vegas investor Jerome D. Mack. "This was a kid we used to see at Passover," he says, "and it sounded like he was running a good company." But Steven Beeks, Republic's executive vice-president at the time, says "everyone knew we either needed investors or to get bought."

BUDDY SYSTEM. Deciding when to hold and when to fold is the test of a gambler, and the Republic deal is but one example of Wynn's knack. He sold one-third of his Activision holdings on Sept. 20, 1995--the day after the stock hit its 52-week high and just before it tumbled 26% as a spate of bad news hit the industry. Wynn says he decided to sell some of his shares when they hit 20.

Wynn's investments frequently intersect with Mirage business. Mirage pays DMX $60,000 a year to provide music for its four casinos. And Wynn's investment in California Pizza Kitchen was conditioned on the chain's letting Mirage franchise any Vegas outlets. The chain's busiest restaurant--with $7 million a year in revenues--operates inside the Mirage, near the famed white tiger exhibit.

On Mirage's behalf, Wynn keeps betting on gaming. Impressed by Circus Circus Enterprises' new management, Mirage quietly bought up nearly 5% of its rival last spring and has gained a tidy $33 million. Now the company is spending $500 million on a glitzy casino in Atlantic City and $1.3 billion on the even glitzier Bellagio--complete with a 12-acre lake--in Las Vegas.

For his personal portfolio, the casino king is thinking real estate these days. Along with the likes of Milken and Rupert Murdoch, he's a partner in HNV Acquisition LP, which last year paid nearly $800 million for Heron International, a troubled British firm that owns commercial real estate throughout Europe. And then there's a trailer park somewhere in New England. "Just a buddy of mine who needed some money," says Wynn.By Ronald Grover in Los Angeles


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