Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Kerkorian Family Lost Control of MGM
Transcript
- Lucas: So earlier this week I was reading about the sale of MGM to Amazon — final price tag around eight and a half billion dollars — and I kept thinking about one person who's really the ghost in that machine: Kirk Kerkorian. Luna: The guy who owned MGM three separate times, if I remember right. Lucas: Four times, actually. He bought it, sold it, bought it again, sold it, bought it a third time, then sold it one last time. That's not normal. That's a pattern that tells you something about how he thought about assets — they were cash-generating machines, not sentimental keepsakes. Luna: Right, and that pattern is really unusual for a family business story, because most founders want to hand the company down. Kerkorian seemed to treat MGM almost like a trading card. Lucas: Exactly. But the family business angle here is what happened after he died in 2015. He left his entire estate — roughly two billion dollars at the time — to a charitable foundation. He had a daughter, but she wasn't involved in his business affairs. And the foundation's board, which included his longtime lawyer and a few other advisors, had a very different risk appetite than Kerkorian did. Luna: So the foundation sold MGM to Amazon, but the timing is interesting. They sold in 2022, which was near the peak of the streaming wars. Did they get a good price? Lucas: Eight and a half billion is a solid number. And the foundation had been looking for an exit for a while. But here's the thing: if Kirk Kerkorian were still alive, would he have sold at that price? I think there's a real chance he would have held out for more, or structured a different deal. He was famously patient. Luna: You could argue the foundation did the prudent thing. But it's also a case study in what happens when the founder's DNA isn't in the decision-making room. Lucas: That's exactly the angle I want to drill into. Because Kerkorian built his fortune through a very specific playbook: find distressed assets, buy them with heavy leverage, hold them through the cycle, and sell when the market is euphoric. He did it in Las Vegas in the sixties and seventies, then in Hollywood, then in the auto industry with Chrysler. Luna: Walk me through the Chrysler trade. That one's less known. Lucas: Sure. In 1990, Chrysler was on the brink of bankruptcy. Kerkorian bought a massive stake — around ten percent — for roughly 250 million dollars. The stock had fallen from 40 dollars to under 10. He then pushed for a merger with another automaker, or a buyback. Eventually, in 1995, he launched a hostile takeover bid for the whole company. It failed, but he made a fortune when Chrysler was acquired by Daimler in 1998. He cashed out for over three billion. Luna: So he was an activist investor before that term really existed. Lucas: Exactly. And that same playbook — buy cheap, use leverage, agitate for change — he applied to MGM. He first bought the studio in 1969 for about 85 million dollars. At the time, MGM was losing money, its backlot had been sold off for real estate development. Kerkorian saw the film library as an undervalued asset. Luna: That library became the crown jewel, right? Thousands of films, including James Bond. Lucas: Yes. The library was the real asset. Kerkorian bought MGM, sold off the distribution network, sold the studio lot, and basically turned it into a licensing machine. He sold MGM in 1985 to Ted Turner for 1.5 billion, but Turner had to borrow heavily and later sold the library back to Kerkorian for a fraction of that. So Kerkorian ended up with the library again. Luna: That's the third time he owned it, then. Lucas: Right. He bought it back in 1986 for 780 million — less than he sold it for. Then he took it public in 1991, sold his stake, but retained control. In 2004, he bought the rest of the company he didn't already own for about 5 billion. And then in 2010, he tried to sell it again but the deal fell through. So by the time he died in 2015, he still owned 55 percent of MGM. Luna: And his daughter didn't want to run it. Lucas: She had no interest. She's a philanthropist, focused on education and the arts. So the foundation that inherited the stake had to decide: hold MGM as a long-term investment, or sell. And they were a charitable foundation — their mission is to give away money, not to run a movie studio. So selling made sense from a fiduciary perspective. Luna: But here's what I find fascinating: Kerkorian built his entire empire on the idea of being a long-term holder with a very high tolerance for volatility. The foundation had a much lower tolerance. So in a way, the structure he chose for his legacy — a charitable foundation — ended up undermining the very strategy that made him successful. Lucas: That's the perfect framing. You see this with a lot of family businesses. The founder is willing to take huge risks because they have total conviction. But the next generation, or a professional board, has a different risk profile. They diversify, they sell, they preserve capital. And that's often the right call — but it means the company's trajectory changes. Luna: Give me another example besides MGM. Lucas: Well, one that comes to mind is the Hartford family and Aetna. The Hartfords were a founding family in insurance, but by the time the company was sold in the 1990s, the family had diluted their stake to almost nothing. The foundation that bore their name had sold off shares to fund charitable work. It's not a bad outcome, but it's a different one. Luna: So the lesson might be: if you want your family business to stay independent, you need a structure that forces future generations to hold the stock, like a trust or a dual-class structure. Kerkorian didn't set that up. Lucas: He didn't. And he probably didn't care. He was famously private and didn't seem to have a dynasty-building impulse. He once said, 'I just like to make deals.' So maybe the foundation selling MGM was exactly what he would have wanted — a clean exit at a good price. Luna: But we'll never know. And that's the mystery at the heart of so many family business stories. Lucas: Quick honest thing — a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making this many of these shows. If these conversations have moved your work forward in some small way, that's a direct line to keeping them going. Luna: Yeah, and it means no ads, no sponsors, just the two of us talking through these stories. So if you find value in that, the link is buy me a coffee dot com slash fexingo. Lucas: Alright, back to Kerkorian. One last piece of the puzzle: the MGM sale to Amazon was announced in 2021, closed in 2022. The foundation got about 4.5 billion for its stake. That money is now funding grants in education, the arts, and humanitarian causes. So in a way, Kerkorian's wealth is doing exactly what he wanted — just not in the form of a movie studio. Luna: And the James Bond franchise now sits under Amazon, which is a whole other story. Lucas: That's a future episode. But for today, the takeaway is this: the structure of family ownership matters enormously. Kerkorian built a fortune through aggressive, patient dealmaking. But he built no structure to preserve his company beyond his lifetime. Whether that was a mistake or a choice is up for debate, but it's a powerful example of how quickly a family business can change once the founder is gone. Luna: And it's a reminder that the founder's personality is often the company's biggest asset — and its biggest risk. Lucas: Exactly. For Fexingo's Family Business Stories, I'm Lucas. Luna: And I'm Luna. See you next time.