This week, information came to light that Wynn Resorts was in talks with Australia’s Crown Resorts with regard to a A$10 billion ($7.1 billion) takeover. The news took the business and gambling world by storm.
However, within 48 hours, the deal was off. Talks stopped abruptly.
It seems that Crown was not supposed to divulge the deal talks publicly. The leaked news subsequently frustrated Wynn to the point that that it took the offer off the table.
Mergers and Acquisitions Boom
Mergers and acquisitions have been the name of the corporation game for the past several years. In the first quarter of 2018, global mergers and acquisitions totaled $1.2 trillion in value, mostly due to general economic growth. This is especially in the United States and Europe where that number was a 67% year-on-year increase.
Within the gambling industry, the number of mergers and acquisitions has also been high. SunTrust gaming analyst Barry Jonas told investors in late 2018 that about 55% of the gaming market was still “addressable” with up to $43 million in merger deals. Big deals had just happened in the US at that time. This includes Penn National Gaming buying Pinnacle Entertainment casinos for $2.8 billion; Boyd Gaming taking the leftover Pinnacle casinos for $575 million; and Eldorado Resorts acquiring seven Tropicana Entertainment casinos for $1.85 billion. In 2018, MGM and Caesars also held extended talks.
Crown Resorts: A Big Aussie Deal
Wynn Resorts have been seeking a presence in the Asian-Pacific gambling market to compete with companies like Las Vegas Sands. Nevertheless, Wynn has yet to move past its property in Macau.
With that growth in mind, Wynn Resorts entered talks with Crown Resorts, owned by James Packer, to enter the high-stakes Australian gambling scene. The discussions had gone so far as to establish a bidding price per share of A$14.75 billion.
At the time of the proposal, Crown’s price per share were valued at a price 26% above the closing price on the day of the announcement. But after the revelation of the talks and proposal, the price per share jumped nearly 20%.
Some analysts said the offer to buy Crown was mostly a defensive one. In other words, to keep companies like Las Vegas Sands or MGM Resorts from buying it.
– Motivation for Sale/Purchase
As far as Packer’s motivation to sell, he has been withdrawing from board and directorial positions at many of his business ventures due to mental health issues. He noted in a 2017 interview that he wanted a simpler life, that high-stakes business ventures had become stressful and lonely. While he is not the sole owner of Crown, his investment company owns just under 50% of it. Therefore, his approval of the deal was required. Even so, the new deal would allow him to remain a significant shareholder in Wynn.
Wynn has had its own share of difficulties with one person lately as well. Steve Wynn recently sold all of his holdings in the company after allegations of sexual harassment and improper relationships with employees. Wynn’s purchase of Crown would give the company renewed focus and help improve its overall image.
In addition, Wynn had a lot to gain by tapping into a new market that focuses heavily on high-stakes gamblers. By introducing them to Wynn in Australia, more opportunities to share them with properties in Macau and Las Vegas could have opened.
On April 8, Crown issued a statement about the proposal. It also noted that the talks were in the preliminary stages and there was no official agreement.
Less than 24 hours later, Wynn called off the talks and issued a statement. “Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transactions.”
The Wall Street Journal reported that a source said Wynn was surprised by Crown’s revelation of the potential deal and was not prepared to discuss it publicly. Others suggested that Wynn was not ready to go public because the company is still under review by the Massachusetts Gambling Commission. This is regarding suitability for a land-based casino on America’s East Coast. Trying to complete the deal with that cloud hanging over it might have prompted a drop in Crown’s stock.
Shares in Wynn dropped upon reports of the news, but Crown stayed strong in the market. Some industry experts opined that Crown made the announcement to let all interested buyers know that Crown was up for merger/acquisition discussions, which could have let to a counterbid. However, the move may have had the opposite effect, though only time will tell.