Wynn Resorts made a takeover bid for the Crown Resorts casino in Australia. The offer by the Las Vegas-based global casino operator was worth about US$7.4bn.
The Crown Resorts team confirmed that they were in confidential talks with Wynn Resorts, in relation to a “potential change of control transaction.”
But it now looks like this takeover deal has fallen through. According to Wynn Resorts, the reason is their anger that many important details of the deal were leaked to the media.
Sharp share price rise
After news of the takeover bid went public, the share price of the Australian casino company rose sharply. At one stage, it saw an increase of 20.5%, bypassing the US$10.15 mark. The largest stake in the company is held by Consolidated Press, the company owned by Australian billionaire James Packer.
Wynn Resorts has a presence predominantly in the US and Macau markets. Its value is around the US$15.8bn mark. The company has been embroiled in a controversy involving its founder and former chief executive and chairman, Steve Wynn.
Steve Wynn has denied sexual misconduct allegations dating back decades. However, the Nevada gambling regulator fined the company US$20m in February. This was for Wynn Resorts’ failure to properly investigate claims by numerous women that they had been sexually assaulted by Wynn.
There is also uncertainty as to whether or not a new Wynn casino in Massachusetts will go ahead, with an investigation ongoing in the state.
Trouble in China
Crown Resorts is dealing with its own struggles. The Chinese government has been cracking down on errant gambling practices and 19 Crown Resorts workers were arrested there for the illegal promotion of gambling.
This led to the company downsizing their plans to expand globally. It sold a site in Las Vegas to Wynn Resorts for US$265m. Since then, Crown has seen a sharp decrease in the number of high rollers coming to its Perth and Melbourne casinos. According to the company’s most recent annual report, annual profits have dropped by a massive 70%.
Packer does not actively manage Crown Resorts. He resigned from 22 different directorships in 2018 for mental health reasons. Packer still has a 47% stake in the company and the takeover deal would see him earn a payout of about US$3.3bn. This would be part cash, part Wynn shares.
Why the takeover bid?
Wynn Resort is looking to expand its global presence, and Australian casinos traditionally are a popular destination for Asian high rollers and tourists.
Currently, Crown Resorts is building a luxury casino on the Sydney waterfront for $1.5bn. It also has two other casinos in Australia that would make up this deal. The company is banking on the new Sydney casino to be the driving force of the future growth of the company.
Wynn’s licenses in Macau have yet to be renewed, something that is not a guarantee. The company is also eyeing up the Japanese casino resort market, with three licenses set to be up for grabs in the near future.
The Wynn proposal was supposedly a 50% shares and 50% cash deal. Should this deal be successful, it would be the largest merger and acquisition in Australia so far this year.
The deal falls through
Wynn Resorts withdrew its $7.4bn bid for Crown. It is apparently unhappy at the willingness of Crown Resorts’ officials to speak with the media about the deal.
The company issued a statement that said: “Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transaction.”
According to the Wall Street Journal, executives at Wynn Resorts were in shock that the Crown Resorts team spoke so openly to the media about this as yet incomplete deal. Wynn’s withdrawal will likely be a big blow to the Australian casino group.