Less than 24 hours after reports emerged that Wynn Resorts was in talks to acquire Crown Resorts – Australia’s biggest casino operator, the casino operator has confirmed that it has decided to terminate its first-ever attempt at a mega-acquisition after the premature disclosure of its preliminary talks with Australia’s Crown Resorts was made public.
Wynn Resorts, which is the second-largest casino company in the world made a A$10 billion ($7.1 billion) takeover bid for Crown Resorts, the initial details of which were leaked by the media on Tuesday.
Details Of The A$10 Billion Deal
Wynn made the acquisition offer as part of efforts to gain a foothold in overseas markets amidst current growth barriers it faces in Asia. Wynn’s licenses are up for renewal in Asia’s gambling hub Macau, and a diversification strategy would provide the company with significant protection in the event that its Macau licenses are not renewed.
The takeover deal would include Wynn’s acquisition of Crown Melbourne and Crown Perth, two of the biggest gambling and entertainment complexes in Australia. It would also have full control of a third Crown casino currently being built near the Sydney harbor.
News of the negotiations was initially published by the Australian Financial Review, which was then confirmed on Tuesday by Crown. As part of the deal, James Packer, who owns 47% of Crown Resorts, would receive a hefty A$4.7 billion payout and would own 9.8% of Wynn’s shares. As soon as the proposal became public, Crown shares rose as much as 22% to A$14.37.
Crown stated that Wynn was offering to acquire the company half in cash and half in shares. Angus Gluskie, the Managing Director of White Funds Management which manages Crown shares, said the proposal was a preliminary-style bid and would have go through a debate process. Crown management also stated that no deal structure had been agreed and that the board was yet to discuss the bid.
Wynn Pulls Out Quickly  
Wynn Resorts surprised the industry by issuing a statement saying it had decided to terminate preliminary discussions with Crown in relation to the A$10 billion acquisition. Once the announcement was made, Wynn’s shares then dropped 3.2% at $140.21 in New York.
Acquisition analysts state that when the media leaks confidential information regarding a potential acquisition, it places a lot of strain on the company that is trying to make the acquisition as the company that is going to be acquired can play hardball in the hopes of getting a better deal!
According to David Bain of Roth Capital Partners, Wynn’s inexperience with pursuing massive acquisition deals also played a factor in the company’s decision not to proceed with further talks. Bain said acquiring synergies requires a proven track record on the part of the potential acquirer.
The A$10 billion deal could have become Australia’s biggest acquisition deal so far this year. Bain went on to say that the termination of early negotiations is in general a positive development for Wynn Resorts.
This is not the first time that a company confirmed acquisition discussions and then backed out later. But this scenario is rare as it demonstrates an aspiring acquirer’s lack of conviction.
Scandal Hurting Wynn Resort’s Growth Prospects
Steve Wynn founded Wynn Resorts in 2002. He was responsible for the establishment of some of the most iconic gambling landmarks in Las Vegas, including the Bellagio, Treasure Island and Mirage. The casino mogul recently became the subject of sexual misconduct allegations which led him to leave Wynn Resorts and sell his 11.8% stake for $2.1 billion. He was replaced as the company’s CEO by Matt Maddox in February 2018.
The sexual harassment scandal impacted on Wynn Resort’s growth prospects. The company could have its license revoked in Massachusetts for failing to disclose sexual misconduct allegations against founder Steve Wynn when it applied for a gaming license back in 2013.
The company is now ramping up its efforts to diversify geographically, and is also planning to penetrate the massive gaming market in Japan. Given the blow to Wynn Resort’s reputation due to the Steve Wynn allegations, it will be difficult for Wynn Resorts to make a strong bid for a coveted casino license in Japan.
Wynn Resorts currently operates four casinos, two in Las Vegas and two in Macau. A fifth one is under construction in Boston.

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