When Crown shares increased into the range of the sale price, Wynn terminated the negotiations.
Wynn Resorts Ltd. terminated its proposed takeover bid of Crown Resorts on Wednesday. The world’s No. 2 casino company ended talks after news of the A$10 billion deal leaked to the Australian press.
The deal promised to be the largest of the year for the Australian gaming industry. The Wynn-Crown deal carried an implied value of A$14.75 per share, a 26% premium at the time Wynn made the offer.
The news caused Crown Resorts shares to jump to A$14.37. Wynn Resorts executives blamed Crown for the jump, because the leaked takeover bid caused shares to jump. Because negotiations were continuing at the time, Wynn believed Crown leaked the news to bolster its negotiating position.
The company’s public statement on the decision read, “Following the premature disclosure of preliminary discussions, Wynn Resorts terminated all discussions with Crown Resorts concerning any transaction.”
“No Assurance…in a Transaction”
Investors burned by the end of talks had ample warning. In a Tuesday SEC filing, Wynn Resorts stated, “No assurance that these discussions will result in a transaction.”
Shares of Wynn Resorts dropped 3% after it pulled the takeover offer. Wynn shares rose 46% this year before this week’s maneuvers.
Wynn’s Strategic Decision
Wynn sought the Crown Resorts deal to expand its geographic reach at a time when the Chinese market is slowing. Macau gaming regulators plan to review Wynn’s licensing status in 2022 and the deal provided diversification if it lost its license for Wynn Palace and Wynn Macau.
Crown Resorts operates the Crown Melbourne and Crown Perth, two of the largest casinos in Australia. The company is developing the Crown Syndey in New South Wales and hopes to open the casino in 2021.
Crown Sydney concerns some in the Australian financial and gaming analysis fields, because it caters to a Asian VIP high rollers at a time when that demographic is declining in Australia. Last year, Chinese high rollers visited Australia at the same pace, but did not spend as much per person.
Wynn Resorts Ends Crown Bid
Wynn Resorts focuses on high-end customers, making Crown Sydney a perfect target for acquisition. To underscore the company policy, former chief executive Steve Wynn once infamously stated “nobody likes being around poor people“. Steve Wynn no longer maintains any connection to the company he founded, but the philosophy still applies.
The Las Vegas casino company planned to renovate and expand the Crown Melbourne and Crown Perth. In addition, Wynn Resorts could have transformed Crown Resorts with its world class customer rewards program.
Focuses on Japanese Market
Wynn plans to refocus on the Japanese casino market in the wake of the deal’s termination. Like most of other top global gaming groups, the company would like to enter the world’s No. 3 economy. Japanese officials plan to hand out 3 casino licenses this year in the Osaka, Wakayama, and Nagasaki prefectures.
Already, Las Vegas Sands, Melco Resorts, and MGM Resorts are seeking the Osaka casino license. All three are major competitors of Wynn Resorts in Macau and have an early start on winning the bid. American and Chinese companies are not the only competitors. Galaxy Entertainment, Solaire, Mohegan Sun, and Group Barriere each attended a casino presentation by Wakayama officials last month.
Bidding could become outrageous. Las Vegas Sands’ Sheldon Adelson once boasted he would invest US$10 billion in the Japanese casino market. Melco’s Lawrence Ho said he would spend “whatever it takes” and even move the company HQ to Japan. MGM Resorts’ Jim Murren stated he would spend as much as US$8 billion on an Osaka license.
Meanwhile, Wynn Resorts moves ahead with its grand opening of the Encore Boston Harbor in June 2019. The US$2.6 billion resort will be a first-ever casino in the Boston area.