There was a moment when I first moved to Las Vegas that makes me realize just how outlandish the dream to own a casino had become. Back then, Tim was still driving a crappy Chevy, and I was still the square from Barnsville. We’d just become partners in his hotel reservation business when we drove down The Strip and passed Caesars Palace. “One day,” Tim turned to me and said, “we’re gonna own our own hotel-casino.”
I stared up at Caesars and started laughing. Tim got pissed.
But what were the odds that a couple of guys making $25,000 a year could pull something like that off? What were the odds that we’d go on to buy The Golden Nugget and then have a chance to sell it in less than a year for more than $50 million in profit? And what were the odds that the two companies competing for The Nugget would be run by cousins with the last name Fertitta?
When news reached me that Frank and Lorenzo were interested in buying The Nugget, I was taken aback. Just as wide-eyed as I was on the day when Tim first told me about Tilman’s offer. Only this time, another emotion flooded through me—relaxation.
All the tension drained out of me, and everything fell into place.
I immediately adjusted to the fact that we were going to sell. My fears that Tim might be seeing the sale as an easy way out after the beating we’d absorbed from Mr. Royalty were gone. They’d been pushed aside by Perry’s reaction. He, too, sensed the twice-as-sweet nature of the deal. I’d also come to understand Tim’s thinking a little better after Andre reacted to the idea of selling with disbelief.
Andre placed a huge value on the adrenaline that came with the partnership and the place. To him, it was like he was surfing with friends who suddenly wanted to quit when he couldn’t wait to see what the next wave looked like. “Don’t be a bitch!” he said to Tim.
“Andre, this is only the first offer, and it’s probably more money than we can make in the next six years,” Tim replied. “And I don’t see you in the office with me ninety hours a week.”
“Oh,” Andre said with an understanding smile. “Then please sell.”
What it took me time to realize is that Tim had not morphed into Steve Wynn or Mr. Fertitta. He’d turned into Kirk Kerkorian, who’ll buy, sell, and rebuy the same property depending on the market value at the moment. “You cannot be emotional about a building,” Kirk has said. “The only way to approach a deal is if it’s good financially.”
That’s exactly where Tim’s head was. He had already sold his baby when he sold Travelscape. Maybe Tim’s dream of owning a casino had been achieved the day he let the roulette player put down the bet that nobody else in Las Vegas would take. It wasn’t going to get any better than that for Tim at The Nugget—especially now that the limits had been strapped down.
If Lorenzo and Frank were doing the buying, everything would be as comfortable as a handshake.
With the purchase price in Tilman’s deal memo tied to present and future cash flow, Landry’s $275 million offer was squishy. There really wasn’t an exact number, and from our perspective, our cash flow was and would be lower than ideal. That was because of the $8 million loss to Mr. Royalty in the third quarter, a huge marketing budget put in place to build a long-term business, and a lot of other transitional costs. Our marketing budget was three times what it would’ve been if we had planned on selling. That was a huge advantage for Tilman when he tied the deal to cash flow and there would be no way we could make up for it in the short term. Everybody knows that a business doesn’t operate at maximum efficiency and profitability when there’s a Just Sold sign on the property and it’s transitioning owners. All these abnormalities were being held against us.
There were no ties to cash flow in Lorenzo and Frank’s offer of $275 million, and there was nothing squishy about it.
Even if you stripped away the friendship and the solid nature of their offer, there were other good reasons to complete the deal with them. Frank and Lorenzo already had a gaming license in the state of Nevada. It might take Tilman more than a year to go through the arduous licensing procedure—and there were no guarantees that he’d get one. At the very least, the licensing process would hold up the transfer of property to Tilman for about a year.
What’s more, Frank and Lorenzo’s company has been ranked by Fortune magazine as the eighteenth-best company to work for in America. That would be reassuring to anyone employed at The Nugget. The environment was so pleasant at Station Casinos that employees saw no reason to unionize.
In fact, this was one of the few sticking points and complications. The Golden Nugget was unionized, so Frank and Lorenzo needed time to figure out how a hotel with unions would be merged into their existing structure. Until this was settled, we needed to figure out a way to keep Tilman at a distance without cutting him loose.
In the meantime, we had lawyers start the preliminary work. We tentatively agreed to sell The Nugget to Station Casinos for $275 million. If Tilman pushed that number higher, the price would always be $20 million less than Landry’s best offer. It was worth the $20 million to us to sell to friends whom we could trust, who had a gaming license, and who could take over the property almost immediately. In my mind, taking $275 million from Frank and Lorenzo wasn’t equivalent to taking $295 million from Tilman. It was better.
Lorenzo, Tim, Frank, and I shook hands. There’s been more friction between the four of us fighting over a dinner check than there was in working out the basic details of this deal. These were not handshakes. These were handshakes that turned into embraces.
The next day, Tim opened a suite at The Nugget so that Station’s executives and analysts could examine our numbers. When a spy (there’s no other way to describe the bastard) in our hotel saw these execs come through the lobby, it was only minutes before Tilman was on the phone and howling.
So what? Tim responded. We didn’t have a deal with you.
It may have been all settled between us and Frank and Lorenzo.
Not so with Tilman.
A phone message came our way through an intermediary.
The message was this: “No matter what the deal is that you’re working on with Station Casinos, Landry’s is willing to pay $20 million more. And, no matter what Station Casinos offers in the future, Landry’s will always be willing to pay $20 million more.”
The words must’ve sounded bold and dramatic when first proposed in Houston. But Tilman could have no idea that our agreement with Frank and Lorenzo stipulated that we’d sell to Station’s for $20 million less than any offer Tilman made.
The message reached Ed, our point person and buffer on the deal, late at night through the intermediary. The intermediary asked Ed to promise that he’d get the message to Tim and me.
Tim was sleeping at the time. He was awakened by a piano tinkling the ragtime theme to The Sting. He reached for the phone and listened to the $20 million message. A minute later, he hung up. In Tim’s world, a man’s handshake is his bond. In Tim’s world, the deal was done. Tim set his head on the pillow and easily drifted back to sleep.
The next morning, Ed returned the message. He told Landry’s general counsel, Steve Scheinthal, that we were going ahead with plans to sell to Station Casinos. He explained that we weren’t going to break our bond with Frank and Lorenzo over $20 million. Even putting aside the friendship, there were factors like the uncertainty surrounding the gaming license and the time it would take to transfer the property to Landry’s that had influenced our decision. Ed thanked Landry’s for its interest and closed the discussion.
Or so we thought.
Later that day, Scheinthal called Ed back.
“Has the deal been signed?” he asked.
“No,” Ed said. “At this point, we’re bound by our word. We’re working on the final documents.”
This left a slender crack, just wide enough for Tilman to slide a fax through.
Scheinthal explained to Ed that Landry’s had just concluded an emergency board meeting. Landry’s was prepared to offer $325 million for The Nugget. On top of that, Landry’s would place $30 million in escrow. If the deal fell through because Tilman couldn’t get a gaming license, the money was ours. No questions asked.
“Will you make sure the offer gets to Tim and Tom?” Scheinthal said.
“If you want me to go to Tim and Tom with this,” Ed said. “I need it on paper.”
The fax came through the slender crack. It said $325 million. That was more than $100 million more than we’d bought The Nugget for a year earlier, and it was $50 million more than Frank and Lorenzo had agreed to pay.
Ed told me the news.
I never thought an offer that gave you a chance to make more than $100 million dollars could make you feel so torn and shitty.
I called to tell Tim.
“We gotta go talk to Lorenzo,” was all Tim could say. His voice sounded like my stomach felt.
Lorenzo was on his way to dinner with his wife, Teresa, when Tim phoned and explained that we needed to see him.
“Get the guys,” Lorenzo said, “and meet us at Piero’s.”
“This,” Teresa said with a knowing smile, “has all the makings of a romantic night out.”
Piero’s is a Vegas institution. Waiters in tuxedo jackets. A long bar. Antique pine tables. A great wine cellar. An owner who sits at your table and eats the pasta off your plate and shares your wine and has a voice that’s impossible to describe and impossible to forget and a face that has proudly seen seven lifts. Sinatra used to hang at Piero’s. When he was a long way away and in the mood, Frank used to have the veal milanese sent to him on the restaurant’s china via his private jet. The mayor’s victory party was staged at Piero’s. Wayne Newton called the place home. Portions of the movie Casino with Robert De Niro and Joe Pesci were filmed there.
So it was fitting. The history of a friendship was about to be tested in a joint with some history to it.
Lorenzo and Teresa were already seated when Tim arrived. Ed and I were on our way. But this wasn’t going to wait. Immediately, Lorenzo could see the struggle in Tim’s eyes.
You’ve got to hand it to Tilman. He knew he had to do something dramatic to insert his “I” between our “we.” That fax was more drama than anyone of us expected. Tim was hoping that Lorenzo and Frank could bump their offer up to within $20 million of the $325. That would allow us to keep our end of the deal.
When Lorenzo heard about the fax, he immediately phoned Frank. Then he turned back to Tim. There was not the slightest hesitation in his voice. “Even at $20 million less,” Lorenzo said. “it’s not a good deal for us.”
Lorenzo could see how lousy Tim felt. When Lorenzo was captain of the Bishop Gorman football team, he made sure that when a player committed a penalty he got an emotional lift from the ten guys around him when he returned to the huddle. Though Tim had committed no penalty, that’s the attitude Lorenzo took.
“This is a great offer,” Lorenzo told Tim. “We’re not going to stand in your way.”
There was no sense of family competition with Tilman as far as Frank and Lorenzo were concerned. They only saw the deal in numbers.
“If $325 million is the number, you gotta take it,” Lorenzo said, “…just make sure that that’s the number.”
Friendship had trumped all. But there was no celebration at the size of Tilman’s offer as we walked out of Piero’s. The tension was back. We were no longer dealing with friends.
“Let’s call in the guys from Skadden, Arps,” Tim said. “It’ll cost more, but we gotta take extra precautions. This contract has to be triple, quadruple, 100 percent ironclad. If we make this deal, I don’t care if Martians invade Fremont Street, Tilman’s got to pay.”
Skadden, Arps, Slate, Meagher and Flom is a premier law firm out of New York specializing in these types of negotiations. Everything about our dealings with Barry Diller and Microsoft had prepared us for this moment.
Even though Lorenzo and Frank had released us from our agreement, we made no quick phone call to Tilman. The next day, Tilman called Ed to find out why. As smart and wily as he is, he couldn’t camouflage the scent that he had to win this competition with his cousins.
“Ed, this is not the way the world works,” he said. “The person who pays the most should win.”
Yes, he had the highest bid, but to us that wasn’t the issue. We needed to know what the value of The Nugget truly was before we sold it. We could think that $325 million was a great deal and that Tilman was overpaying to beat out his cousins. But the value of The Nugget really had not been established. There’s a price of entry into Las Vegas, and I sensed that Tilman was willing to pay that price. We knew he was looking at the Riviera. Word was, the Riviera was on the block for twice the money that Tilman was offering us. Tilman was going to pay for The Nugget exactly what it was worth to his company to have it. That was The Nugget’s value. We needed to find out what that number was.
There was one sure way. Ed called Landry’s and explained that its $325 million offer was the highest, but that something new had come up. (Another party was expressing interest.) “If you guys can go up another $10 million,” he said, “that would put you over the top.”
Not only did we owe it to ourselves to get the best possible deal. But we remembered Barry Diller’s tactics. If you sense that somebody is going to try to drop the price to the cellar down the road, it’s a good idea first to try to push it through the roof.
Landry’s came back and said its board would not approve another $10 million. It could only go $5 million more.
That was as high as we were going to take Tilman. Soon we would see how low he would try to take us. It was time for the boys from Skadden, Arps to come in.
Lawyers on both sides started working on the purchaser’s agreement. The numbers were complicated. We didn’t want the final purchase price to be linked in any way to the level of our recent earnings. We wanted Landry’s to buy at the point where our profits would’ve been if Mr. Royalty had never set foot in the place, and if we hadn’t budgeted so much on marketing to build the business up. We wanted Tilman to buy at the numbers that he would’ve seen with normal cash flows after our transition year. There were also complex financing terms involved, including bond payments and a $23 million revolving line of credit. If I began to describe all the twists in the deal through all the numbers on the table you’d be reading another book. And it would be a confusing book, because the numbers never really meant what the numbers seemed to be. Sure, Tilman could offer $330 million. But it wasn’t really $330 million if it didn’t assume The Nugget’s $23 million revolving line of credit. There were countless ways for that $330 million to get chiseled down.
So I’m going to boil all the figures down to a simple concept.
Here it is. There’s only one number that counts when you’re selling a property. That’s the money that goes into your bank account at the end of the deal. As precise as all the other numbers might be, they’re just pencil marks on legal pads.
The lawyers worked through the points with give and take on both sides. Landry’s agreed to assume The Nugget’s revolving line of credit. We agreed to allow Landry’s to define the purchase price on its press release. As we inched closer and closer, I remained at a strategic distance. I knew a shot was coming, and I waited for it with a poker face.
When it arrived, I still couldn’t believe it.
It occurred, amazingly, in a room full of lawyers from Skadden, Arps. Neither Tim nor I was there. At the end of a long day of negotiations, Scheinthal walked to the easel at the head of the room and started reviewing the agreement. As he strolled through the purchase price, he tried to push off two bond payments at roughly $7.5 million apiece on Tim and me.
They were trying to siphon $15 million from our end of the deal in full view of Ed Borgato and some of the best lawyers in the country. Ed blinked in disbelief. “Hold on, Steve, you’re forgetting something. That’s not the deal at all.”
Scheinthal tried for an Academy Award. “Ohhhhhh, we thought those payments were going to come out of your end of the deal.”
Lawyers from both sides looked at each other. Ed stopped the meeting and asked Scheinthal and a few others to adjourn to another office.
“Steve,” Ed cut to the chase, “what’s going on?”
“Ed, we can’t do the deal at this price. It’s too high. Our board of directors won’t allow it. We can’t get a fairness opinion from our banker.”
First, they had to have The Nugget. Now, they can’t possibly do it. The boys from Skadden, Arps had never seen anything like it—and they’d seen it all. I was determined to remain disciplined and keep my poker face as the lawyers went home and the deal disintegrated. It was hard to know if it was simply ridiculous, or merely posturing for the next round.
“Tilman will be back,” Tim said. “He’s got the green felt disease. I know. I had it once myself.”
The green felt disease is local lingo for a syndrome that wealthy businessmen are prone to when they get around Vegas. They just have to buy a casino. Maybe Tilman had the green felt disease. Maybe he was competing with his cousins. Maybe he’d overextended himself while getting us to the table. He was making interest payments on all the money he’d borrowed to do the deal. That had to be burning a hole in his pocket. If he really wanted The Nugget, we had him over a barrel. But playing this kind of poker with a guy like Tilman can put your stomach in knots and drive you to the nuthouse. It’s like being at a poker table with a guy who won’t make a decision. You’re sitting there waiting for an answer. Are you in big-time? Are you out? Make up your mind already!
We figured he was going to take his shot—and he had. But now we got a call that he wanted to talk to us personally. He was flying to Vegas to work it out. We had no idea what he had in mind. Perhaps it was just as confounding for Tilman to figure us out.
Tim and I had assumed contradictory roles. He was the guy who wanted to surge ahead and get the deal done while I remained stone-faced and leery. While these were roles, there was some truth to them under the surface. Tim is impatient. He believes that when too many people are around the negotiating table the deal tends to slow down. So he has a tendency to go off on his own and solve problems as if he were the Lone Ranger. I needed to hold him back and exercise patience. That was one reason we’d directed all communication through Ed.
But now it was time for us to move. The good guy/bad guy routine can be useful if you’re trying to keep your rival off balance. But Tilman wasn’t showing us all of his cards. So Tim and I had to come together and put ours on the table.
Exactly how much money did we need to put in the bank in exchange for everything we’d put into The Nugget? It was a serious conversation, but it could have been a scene in a comical movie. That’s because Tim was preparing for a part in a movie at the time, a movie we were shooting on the property. The movie was called Bachelor Party Vegas—and Tim had agreed to play a part as a casino owner. As he pored through spreadsheets to determine the number we needed to see in order to make the deal work, he paused again and again to rehearse his lines. But finally, we crunched all the figures down.
Tim, our partners, and I had put up $50 million of our own cash to buy the joint. Tim and I were in for $37.5 million. Andre and Perry were in for $7.5 million. And Chuck Mathewson had put up $5 million.
We could negotiate all night with Tilman about bond debt payments and the revolving line of credit, but that would only sidetrack us. We needed to stick with a single, firm number and not waver—just as we did with Expedia. The number we’d agreed upon before we were sidetracked was $163 million. That was still our number. All Tillman had to do was put $163 million in our bank accounts and The Nugget was his.
“Any regrets?” Tim asked.
“No regrets,” I said.
Someone knocked on the door to tell Tim it was time for makeup.
Tim had to shoot and reshoot a scene where he snapped a pool cue in half and went wild admonishing a bunch of young guys having a bachelor party. It took about fourteen broken pool cues to get it right, and Tilman was left waiting until after midnight for the shooting to end. As soon as it did, Tim and I went to meet him.
Tilman explained that his board wouldn’t let him go in for the additional $5 million. Tim became as focused as a laser. He walked to a white board and picked up a marker. And he wrote the number that mattered to us most: $163 million.
Whatever Tilman needed to do to make the final purchase price put $163 million in our bank accounts was fine by us. Whatever Tillman wanted to do on his company press release was fine by us. But that was the number we needed to see in our bank accounts.
There was discussion, agreement, and a casual conversation that ended at 3:00 AM.
The lawyers soon returned to The Nugget and began to move forward. We were close enough to begin sending Tilman a copy of our DOR every morning. And then a not-so-funny number appeared on the DOR midway down the page on the left-hand column.
One of our big players came into town and asked for the high limits to which he was accustomed. It was a tough call. The limits had been strapped down ever since we stopped taking Mr. Royalty’s action. But this guy wasn’t Mr. Royalty. He was a nice guy, and we liked him. Tim came to me and asked what I thought we should do. We figured if he were lucky, he’d beat us for a million. If not, we’d probably take him for three million. It was almost like a last fling. We let him bet big—and the guy won a million bucks.
Naturally, the dreaded parenthesis appeared on the DOR. Of course, we could say this was abnormal, that we’d win it back and recover by the end of the month. But if you were Tilman, you woke up one morning to find out the property you were purchasing was worth a million dollars less than it was the day before. What if this pattern continued? Even Tim acknowledged that Tilman had a legitimate beef. The problem was the way he decided to cook it.
Tilman and Scheinthal walked in uninvited on a meeting between Ed and our lawyers holding a copy of that DOR.
“This is a problem. You’re telling us that everything is fine, but it isn’t. We’re paying big money here, and we can’t buy it at this price if this is what’s really going on.”
The more they got into it, the more heated the exchange became.
“Listen,” Ed said, “there’s an ebb and flow on the casino floor. It swings both ways. When you get the keys to the place you can change the odds and limits and run a different kind of a casino.”
But logic is only kerosene on the fire to someone spoiling for a fight. This was not a logical confrontation, and it built to the point where Scheinthal lost it.
“Tim Poster sat right here and said that business is going good,” he said. Scheinthal grabbed a pad that had a hard back, slammed it on the table and broke it in half. “Tim Poster is a fucking liar!”
Ed’s fist slammed down on the table. “Don’t you ever call Tim Poster a liar in this building! In fact, you can all get the fuck out right now.”
Scheinthal and Tilman began to jabber that they weren’t going to be taken advantage of.
“Hey,” Ed came back, “let’s not pretend that this is anything more than you guys trying to lower the price. You’re paying a fair price—and you know it. If you don’t understand the ebb and flow and economics of the casino business, maybe you ought to go back to Texas and continue to up-sell cheesecakes!”
This is just about the spot where I innocently opened the door and stepped into a room that suddenly went quiet.
“Hey, guys, what’s going on?”
You couldn’t help but breathe the tension.
“Tom, we’re going to wrap up here in two minutes,” Ed said. “Can we see you a little later?”
As much as I tried to maintain my poker face afterward when the heated back-and-forth was related to me, there’s just so much a guy can take before he says “What the fuck?” I thought the deal might be dead yet again. Tim took being called a liar less personally than I did. He sensed it was just posturing. His response was to return the gesture. When a group of Landry’s lawyers unpacked for their own session without knowledge of what had just gone down, Tim walked in and asked them what they were doing.
“We’re going to have a meeting.”
“No you’re not,” Tim said. “Pack up your shit and get out.”
He came back to my office. It wasn’t long before Scheinthal was slinking in to apologize to Tim. Tim didn’t hold it against him. Then Steve asked Tim if he’d go talk to Tilman for ten minutes.
I wanted to go with Tim, but Tim thought that it was personal. “Let me go alone,” he said. “Tilman wants to apologize and get things back on track. I feel it. Let’s see if there’s really a deal here. I’ll be back in ten minutes.”
Tim left. I stayed seated at my desk while Ed and the boys from Skadden, Arps paced back and forth, and Bally licked her paws and wondered what was going on. Fifteen minutes passed. No Tim. Twenty. No Tim. Half an hour. No Tim. I sensed the Lone Ranger was at it again. The boys from Skadden, Arps were not happy with the situation, whatever it was. I worked the phones to keep Andre and Perry appraised, and kept the door closed so that none of the tension would leak outside.
It’s kind of crazy to describe the room in terms of tension when I think of my father landing an airplane carrying hundreds of passengers after an engine has failed. But I did get more and more anxious as the lawyers paced in front of me. They were worried that Tilman would seize on Tim’s desire to sell and get the price lowered. They were worried that things were out of control. As time passed, I began to feel like a pilot whose passengers were entering the cockpit to find out just who was flying the plane. After forty-five minutes, I couldn’t take it.
I headed to Tilman’s suite with Ed. From behind the door, we could hear laughter ripple through the air. Like a couple of buddies who’d just returned from a morning of hunting with a sack of quail.
I rapped on the door.
There were some footsteps. Then Tilman answered.
“What’s going on here?” I asked. My heart was pounding.
Tim popped up from a chair.
“Tom, Tom, everything’s fine. Tilman just wanted to talk to me.”
I remained expressionless as they quickly summarized their discussion. Tilman wanted to pick up the negotiations at the point where they were before he’d seen the parenthesis on that DOR. He wanted to get the deal done.
Tim, Ed, and I excused ourselves and walked through an archway in the suite to an adjoining room.
“If they’re willing to do the deal at the number we agreed upon the other night,” Tim asked, “are we still willing to trust the guy and do the deal?”
Trust was the last word I wanted to hear at that moment.
“You told me you were going to be back in ten minutes,” I said.
Tim had taken the apology and used it to smash through the wall and get the deal done. But he was looking at a guy who didn’t give a shit about money when it’s measured against the word “trust.”
We were no longer lucky whiz kids who hit it rich because of the Internet. We were no longer the boys who’d been chumped by Barry Diller. We were now men who’d used our very different strengths and everything at our disposal to be able to knock down the wall and finalize this deal. But in the end, we were still Tim and Tom. And so we stood a few feet apart, arms crossed, fuming.
“I’m begging you guys,” Ed said. “Not now.”
We walked back in the room and shook Tilman’s hand. The deal was finally done.
Then we walked down the corridor in silence and headed up to Tim’s office. As we did, my anger dissipated, and everything became clear to me. I’d been keeping the plane level in turbulence so that Tim could walk out on the wing. He’d gotten the deal done. Why was I giving him shit about ten minutes?
How could he think I wasn’t thinking of both of us? Tim wondered. Have I ever not thought of both of us?
We entered Tim’s office and closed the door. Bally was sitting on the couch. She looked up at us as if to say, “Hey, where have you guys been?”
We both smiled. Our smiles grew wider and wider and we burst out laughing.
And that’s how we made our second $100 million.