Mirage said its board called the offer "inadequate and not in the best interests of Mirage Resorts shareholders." The company said the rejection was recommended by its investment banker,
, and its legal adviser
Wachtell, Lipton, Rosen & Katz.
The MGM Grand offer came last week in a letter to Stephen A. Wynn, chairman and chief executive of Mirage. MGM Grand offered to pay $17 a share -- either all in cash or a combination of $7 a share in cash and MGM Grand stock valued at $10 -- to acquire Mirage.
On Tuesday, Mirage's board called MGM's offer "an opportunistic bid which is timed to maximize values for the bidder."
Still, the decision to reject the deal might not mark the end of takeover bids for Mirage.
Mirage did acknowledge that it "would be willing to consider a transaction that would fairly reflect the long-term values inherent in the Mirage properties, brand name and good will."
Mirage announced its board's rejection of the MGM Grand bid after the stock market closed. Its shares ended trading down 3/16, or 1.2%, at 15 3/4. MGM Grand's stock slipped 5/16, or 1.6%, to 19 7/8.
The rejection was accompanied by a so-called poison pill that would give common shareholders control of the company if a hostile takeover were to occur.
Mirage said that if any group acquired 10% or more of its stock, it would protect the company by distributing rights for common shareholders to buy preferred shares at the rate of one one-thousandth of a $70 share of new junior preferred stock for each common share.
Dennis Forst, an analyst for McDonald Investments, called the poison pill "preventative medicine," and added that Mirage "clearly was not going to accept $17 a share.
"They didn't want to overtly come out and say that they wanted to negotiate a higher price," he said. "I think they would rather just drop the whole thing entirely." Forst rates MGM a buy and Mirage a hold, and has not done any underwriting for either company.
Indeed, the poison pill is largely symbolic because Nevada law already requires an outsider to get the approval of a gaming company's board before buying 10% or more of the company's stock.
"The rights are designed to assure that all of Mirage Resorts' stockholders receive fair and equal treatment in the event of any proposed takeover of the company and to guard against abusive tactics to gain control of Mirage without paying all stockholders a premium for that control," Wynn said in a statement.