Boutique investment bank Union Gaming has described Wynn Resorts’ shock move to acquire Australian IR operator Crown as part of a larger strategy that is “purely defensive”.
While Wynn Resorts announced overnight that it has now called off its pursuit of Crown due to information being leaked, analysts had already spent much of Tuesday running the rule over the potential acquisition. It remains to be seen whether Wynn renews its interest once attention dies down.
In a note following Tuesday’s news that Wynn had tabled a US$7.1 billion takeover bid comprising a half cash, half stock transaction, Union Gaming analyst John DeCree proposed that the company’s Crown pursuit could be a means to deter potential suitors looking to take control of Wynn amid ongoing regulatory concerns in the US and the looming expiry of its Macau gaming concession in 2022.
“The Wynn Las Vegas and Macau assets are highly sought after,” DeCree said. “Acquisition is likely the only way for a new entrant to gain exposure to Macau as the government has little desire to issue any new concessions, especially to a foreign company. Further, an unfavorable outcome in Massachusetts (i.e. license revoked) could put Wynn shares under pressure and the company at risk of becoming an attractive takeover target again.”
DeCree also suggested that Wynn’s move could be a means of staving off any potential of being acquired itself after Macau’s Galaxy Entertainment Group purchased a 4.9% stake in the company in the wake of the Steve Wynn scandal last year.
“If Wynn acquired Crown, not only would the larger enterprise become a more difficult target but it would deter potential suitors for a number of reasons,” he said. “First, US-based peers like Las Vegas Sands and MGM probably have little to no strategic interest in Australia, making Wynn a less attractive target.
“Further, the stringent regulatory probity in Australia would likely keep international suitors like Galaxy or Genting at bay from pursuing Wynn. Having to pass both Australia and Nevada for licensing could prove to be a long and tedious task.”
In a separate note, Morgan Stanley analysts suggested that Crown’s assets would potentially fit snugly into the Wynn Resorts portfolio.
“Wynn’s focus has been on owning a handful of luxury assets in the best gaming markets in the world and we believe Crown’s portfolio would fit into this strategy (only operating 2 major properties, developing another),” said Thomas Allen, Bradford Dalinka, Michael M DeLalio and Elise Kennedy
“Australia is a strong market with a significant Chinese player base (Crown has historically said less than half of its VIP rev is generated by visitors from Mainland China). Wynn has strong relationships with Chinese players … this could create an attractive cross-selling opportunity, one that wasn’t there for Wynn when Crown was partnered with Melco.”
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