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When he was young, Kirk Kerkorian was a high roller on the Las Vegas craps tables. Then he switched to another game: parlaying a dealership in renovated DC-3s into a profitable charter airline. Two and a half years ago, at the age of 50, he became a financial operator of national stature. In a series of bold maneuvers, Kerkorian:
> Sold his Trans International Airlines, a nonscheduled carrier, to Transamerica Corp. and then sold his Transamerica stock for $104 million.
> Bought control of Western Air Lines for $67.5 million.
> Bought control of MGM, the ailing movie and television company, for $70 million.
> Bought his way into the Las Vegas hotel and casino business in a big way. First, he purchased the Flamingo, and then he started to build the International. Next, he sold to the public the stock in the company that owned these casino-hotels, International Leisure Corp.
Then his luck began to turn. As the stock market slid and money became scarcer and costlier, Kerkorian showed increasing signs of strain. To pay for some of his ventures, he had borrowed $72 million in Europe and agreed to put up as collateral stock with a market value of 140% of the loans. Every time the value of his holdings shrank, Kerkorian was compelled to deposit more shares with the banks. He still owes banks in England and Germany about $62 million. The value of his holdings in International Leisure, MGM and Western has shrunk from a high of half a billion dollars in 1969 to $79 million last week—a paper loss of some $400 million.
Slump in Las Vegas. To raise cash, Kerkorian has been trying to sell International Leisure Corp. and its hotels, which are his only profitable ventures. Last week he made a sale to Hilton Hotels Corp.—at fire-sale prices. Hilton will buy 44% of International's stock from Kerkorian at $6.08 a share. At that price, Kerkorian stands to collect only $17.7 million. Last year the 2.9 million shares that he is selling were worth $193 million.
In a complex deal, Hilton agreed to pay an extra premium if International Leisure's 1970 net earnings, multiplied by eight, come to more than $6.08 a share. But Las Vegas is feeling the recession. There are almost as many visitors as usual, but they are spending less, and the International and Flamingo casinos are often busy mainly with penny-ante gamblers. Las Vegas hotelmen are so worried that they have called a meeting this week to discuss emergency plans for grandiose promotions designed to lure more tourists.
Kerkorian, the quiet, taciturn son of an Armenian immigrant, admits that he did not see the recession coming. He does not believe in economic forecasting: "If economists were any good at business, they would be rich men instead of advisers to rich men." Kerkorian's view of business: "Sometimes you lose, but that's the nature of the game. There's always another game and another chance to win."