Wynn Resorts (WYNN) is no longer in discussions to acquire
Australian casino operator Crown Resorts (OTC: CWLDY, ASX: CWN).
After reports of Wynn's approach, Crown Resorts confirmed Wynn's confidential takeover proposal overnight. Crown said that Wynn offered to acquire the company at A$14.75/share in half cash and half stock, which would've amounted to a ~$7 bln deal at ~26% premium.
This morning, Wynn put out a terse statement: "Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transaction."
News of a potential deal sort of came out of nowhere and surprised investors. Crown operates luxury resort casinos in Melbourne and Perth in Australia and a smaller outlet in London. The company is also building a luxury resort casino in Sydney, Australia. One year ago, James Packer, who still owns 47% of Crown, resigned from the Board, citing mental health issues.
Apparently, Wynn is interested in diversifying its gaming empire, which includes luxury resort casinos in Las Vegas and Macau. Over the years, Las Vegas has become more of an entertainment destination than a gaming hub. The Macau market faces tough comparisons in 2019. Meanwhile, Wynn's sweet spot in the VIP gaming segment continues to deal with both macro headwinds and potential regulatory headwinds. What's more, license concessions for all three US casino operators in Macau (Wynn, Sands, and MGM) expire in 2022, creating a somewhat uncertain outlook.
The company is set to open new luxury resort and casino Encore Boston Harbor in June just outside of Boston, but the company's gaming license in the Commonwealth of Massachusetts currently hangs in the balance. Wynn Chief Executive Matt Maddox testified before state gaming regulators last week regarding what he knew about sexual misconduct allegations concerning former CEO Steve Wynn.
Global casino operators are courting regional Japanese officials after the country's Parliament approved casinos for the first time last summer. This remains a huge opportunity but is still years away from coming to fruition. Rivals Melco (MLCO), MGM (MGM), and Las Vegas Sands (LVS) appear to have a leg up on Wynn in Japan, although Matt Maddox has said that the company is well-positioned in the country.
The stock is taking a breather this session, down 3%. It was up 22% month-to-date coming into today after March industry-wide Macau gaming data came in better than expected, falling 0.4% year-over-year.
At ~11x EV/EBITDA, Wynn trades at a very slight discount to Las Vegas Sands and a very narrow premium to MGM and Melco. In the post-Steve Wynn world, Wynn investors face a somewhat uncertain outlook.
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