The Australian Crown Resorts casino giant has revealed it has received an indicative takeover bid of $7.4bn from US gambling company Wynn Resorts.
What could the deal mean?
A takeover would allow Las Vegas-based Wynn Resorts to further expand its portfolio and, moreover, have a standing in Australia’s gambling market, which has always been popular among Chinese tourists. The US company could potentially see huge benefits from the purchase.
Should the deal be accepted, it will end the 12-year career of Crown’s majority owner James Packer. Officially Packer left the board last year due to ongoing mental health issues, although he still owns 47% of the company. The deal would see him walk away with a $3.3bn payout.
According to a shareholder in Crown Resorts, James McGlew, the company would have liked to have seen a higher initial bid placed, but believes that this could be the starting point of the deal. The company has revealed that negotiations are currently at the preliminary stage – no agreement on a takeover deal or value has been reached yet.
Angus Gluskie, managing director of White Funds Management, which holds Crown shares, issued a statement:
“It’s a preliminary-style bid which doesn’t yet provide an adequate premium for control, and most would expect there to be both more debate about the strategic merit and pricing.”
Gambling giant Crown said Wynn proposed to purchase the company in 50% cash and 50% shares. However, in a statement it said the current proposal has not yet gone to the board.
A sale based on the offered bid would be the largest merger and acquisition deal in Australia so far this year. If the takeover deal goes ahead, Wynn Resorts would be in charge of the $1.5bn Barangaroo luxury casino, which is still being built on the prized Sydney waterfront, as well as two lavishly revamped Australian casinos.
The new casino is one of the largest gambling developments in the country and has been branded the “engine of future growth” by Crowns Resorts.
Wynn hoping to expand geographic locations
As well as its companies in the United States and Macau, Wynn has sought to diversify geographically diversify to protect its growth prospects. Its Macau licenses are yet to be renewed.
Last year, Wynn revealed it had invested in an extremely large advertising promotion for a resort in Japan. The Japanese market is viewed as a potential goldmine, like Macau. Crown Resorts had previously eyed Japan as a target for expansion.
The US gambling company has seen a few shake-ups recently following sexual misconduct claims against former CEO Steve Wynn. The allegations were raised by the company’s largest shareholder, Elaine Wynn, who co-founded the company with her ex-husband.
Arrest scandal in China
Crown withdrew its global expansion plans in 2016, following the scandalous arrests of 18 of its staff members in China for breaking marketing legislation.
The company then decided to focus on increasing its assets in casinos in Sydney, Melbourne and Perth. As part of the shake-up it sold a development site in Las Vegas to Wynn for $265m.
If the takeover deal goes ahead, it would provide Crown shareholders with financial relief for their investment.