Billionaire US businessman Tilman Fertitta could be positioning for a full takeover of Wynn Resorts after it was revealed this week that he has acquired a 6.1% stake in the global casino operator, according to CBRE Equity Research analysts.
Fertitta – who owns American hospitality giant Landry’s and the NBA’s Houston Rockets as well as five casinos under the Golden Nugget brand, including in Las Vegas and Atlantic City – was unveiled as Wynn’s second largest individual shareholder after filing a 13G with the Securities and Exchange Commission on Monday.
His 6.1% stake was acquired on 19 October, the disclosure shows, and places him behind only Elaine Wynn’s 8.9% when it comes to private holdings.
While Fertita has not yet explained his reasoning for the acquisition or plans moving forward, CBRE analysts John DeCree and Max Marsh said in a note that it was not in the billionaire’s nature to retain passive investments.
“We look to his prior acquisitions, including McCormick & Schmick’s and Morton’s Restaurant Group, both of which started with 13G filings that culminated in a full takeover,” they write.
“Wynn is a more complicated endeavor, but the take-private saga of Landry’s from 2008-10 (when Fertitta acquired all outstanding shares) is a good example of Fertitta’s tenacity.”
Of interest is the fact that Fertitta acquired his Wynn shares on the same day he received approval from Nevada officials to develop a new casino resort on the Las Vegas Strip, on land he acquired in June for US$270 million. The resort is slated to include a 43-storey hotel with 2,420 rooms and an array of other facilities.
Why would the magnate make such a substantial play for Wynn while already planning a Strip development? CBRE suggests the opportunity was simply too good to be true, with Wynn’s share price seen to be trading well below fair value due primarily to the headwinds it continues to face in Macau.
“Although it would seem like Fertitta had his future on the Strip ready to go, the opportunity to make a play for Wynn was likely too tempting with the shares so dislocated from fundamentals in the US,” the analysts state.
“Potential buyers of Wynn have long struggled over how to deal with Macau, but with seven bidders for six concessions, there could be a window of opportunity to transact. Fertitta also previously reached a deal to take Landry’s public via a SPAC but canceled that trade late last year, meaning a reverse merger could be an option.”
On the likely next play, DeCree and Marsh write, “Fertitta could remain passive, but that would be uncharacteristic. It’s hard to predict exactly how this plays out, but if Fertitta does make a move, it would likely be an outright bid given the complexities of the Wynn board that make a proxy fight unlikely.
“At the very least, one more savvy investor recognizes the underlying value of Wynn, giving us confidence in our favorable call on the shares.”
CBRE has set a price target of US$100 on Wynn shares, which were trading at US$63.90 at time of writing.