Battles With Trump Behind Him : Bally Chief Betting on Luckier Year in 1988

Robert E. Mullane stood on the balcony of a penthouse suite at Bally’s Hotel and surveyed a 23-acre, $30-million parcel of land 27 stories below on the Las Vegas Strip.

The genial Irishman has headed Chicago-based Bally Manufacturing Corp. for eight years, and 1987 was one of the more turbulent ones. With a little luck, a healthy economy and transformation of the expensive patch of desert into an expansion of Bally’s biggest resort, 1988 should be better.

The firm that began manufacturing pinball machines in 1931, then graduated to gaming equipment, is today the largest gaming company in the world--with two resorts in Atlantic City and hotel-casinos in Las Vegas and Reno. Bally also has some 250 fitness centers across the United States and more than 300 Aladdin’s Castle video arcades.

The company’s current balance sheet reflects $2.56 billion in assets, up from $2 billion a year ago. Revenue for the first three quarters of 1987 was $1.29 billion, compared to $909 million for the same period a year ago. Fourth-quarter revenue is expected to be up substantially over the same period in 1986.

Mullane reflected on Bally’s celebrated battles with business tycoon Donald J. Trump in 1987, and focused on the year ahead.

“Donald Trump is past history for us,” he said. “It was an unfortunate occurrence.”

Trump Payment Immaterial

The “unfortunate occurrence” cost the company $24 million--the amount Bally paid Trump to buy back the stock he purchased in late 1986 and early 1987. Trump had purchased 9.9% interest in Bally, making him the company’s single largest stockholder, and had announced intentions to buy as much as 49% of the company.

“In the long run, Bally came out fine,” Mullane said of the high-stakes stock battle with Trump.

The payment to Trump “was never material to the company” since it has a cash flow in excess of $100 million a year, Mullane said.

“We thought it was in the best interest to buy him out,” Mullane said. “We had several things in the mill that his ownership was clouding.”

Mullane said the legal entanglements with Trump had threatened Bally’s sale of its Six Flags amusement park subsidiary. The sale, consummated in May, resulted in after-tax gains of about $79 million for the company.

What’s ahead for the gaming and amusement industry giant?

“I think 1988 is going to be a good year,” Mullane said. “The greatest challenge ahead is to play the economy properly. We don’t know what that’s going to do. We’ve got to be very quick on our feet. I see no major problems unless the economy turns out to be a lot worse than anyone expects.”

The year should see completion of a 30-story, 800-room tower at Bally’s Park Place in Atlantic City and the start of revitalization work at properties in Las Vegas and Reno. The two Nevada resorts comprise some 5,000 rooms, making renovation work very costly.

“If you spent $20,000 a room you’d have $60 million tied up here alone,” Mullane said of the Las Vegas hotel. “Everything you do here is a major, major project. The bottom line is we’re going to spend a lot of money here and we’re going to make this place better.”

In addition to general renovations, the company is mulling other plans for the Las Vegas property, including expansion of the hotel on the adjacent parcel of land.

Will Keep Fitness Centers

The company was close to selling its health and fitness centers until the Oct. 19 debacle on Wall Street.

“We’d asked a price and would have received it if Black Monday hadn’t occurred,” he said, referring to the stock market nose dive.

Mullane said a unit of Citicorp had agreed to buy the centers for more than $500 million, but the stock market problems made financing more difficult and the company decided to keep the centers for now.

Bally entered the casino business by spending $320 million to build the Park Place resort in Atlantic City eight years ago. The company spent $550 million to buy the Las Vegas and Reno resorts, the old MGM Grand Hotels, from financier Kirk Kerkorian in 1985.

“I wish I could find two more like them,” Mullane said of the Nevada resorts.

Bally purchased the Golden Nugget in Atlantic City from Steve Wynn in a $440-million deal last January, renaming the property Bally’s Grand.

Lotteries Not a Concern

Park Place remains the big winner for Bally, accounting for $270 million of the $700-million win the four casinos reported the past year.

Mullane disagrees with some gaming executives who worry that state lotteries may cut into gaming revenues.

“I think lotteries defuse the quest for casino gaming by various states,” Mullane said. “It’s like an escape valve.”

States such as New York, Illinois and California are less likely to accept casino gambling because they are earning from lotteries, Mullane said. Legalized casino gambling in those states could deal a major economic blow to Las Vegas and Atlantic City, Mullane said.

Mullane, who joined the company 16 years ago, took over as president and chairman in 1979.