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Crown share prices rocket with Wynn whispers

Wed, Apr 10, 8:56am by Staff Writer

James Packers’ backed Crown Resorts is in confidential discussions about a takeover by the Las Vegas based casino giant Wynn Resorts.

Crown Resorts – which owns casinos in Melbourne, Perth and London and is soon to open a casino in the Sydney harbourside – is considering and cash-and-scrip offer with an implied value of $14.85 a share.

The offer values the company at $10 billion.

The news sent Crown’s share price rocketing on Tuesday morning, according to The Age.

At 12.15pm AEST, Crown shares are 31.7 per cent higher at $14.29.

The share jupm has resulted in the value of Mr Packer’s 46.1 per cent stake in Crown, increasing his wealth on paper by about $800 million on Tuesday.

“The proposal is subject to a number of conditions including due diligence, Wynn obtaining all the necessary regulatory approvals and a recommendation by the Crown board,” the company said in a statement on Tuesday.

“The Crown board has not yet considered the most recent proposal from Wynn.”

The discussions between Crown and Wynn are said to be in the preliminary stages, with Crown adding that no agreement had been reached in relation to the structure, value or terms of the deal.

“There is no certainty that these discussions will result in a transaction,” the company said.

Goldman Sachs and UBS are acting as financial advisers to Crown, with Ashurst the legal adviser.

Wynn Resorts runs several casinos across the United States and Macau and was founded by billionaire casino magnate Steve Wynn.

Mr Wynn resigned as chairman and chief executive in February 2018 amid allegations of sexual misconduct and has since sold his stake in the business.

David Fabris, a senior gaming analyst with Macquarie Research, said the timing and large size of Wynn Resorts’ takeover offer was a “surprise” and should be well-received by Crown shareholders.

“We would argue that given no assets are located geographically, the ability to generate synergies is most likely related to corporate cost benefits and VIP,” he said.

“We would also highlight that Crown Resorts’ Australian casinos are efficiently run given recent cost-out initiatives, so improved operational performance domestically may also be hard to justify.”

With a number of other Australian casinos already under foreign ownership – most recently SkyCity’s Darwin casino, which  was sold to Delaware North – Macquarie analysts believed regulatory approvals were unlikely to be a concern if takeover proceeded.

“Provided Wynn Resorts achieves probity, we would not consider foreign ownership as a likely concern,” Mr Fabris said.

The takeover talks and Crown’s share price rise come after the company lost 20 per cent of its value since mid-2018 with profits below forecasts.

Company executives have attributed the fall to a pullback in spending from super-rich Asian gamblers due to China’s slowing economic growth and simmering trade tensions with the United States.

The casino giant has endured a turbulent past three years following the arrest and jailing of 19 of its staff for illegally promoting gambling in mainland China, a retreat from ambitious global expansion plans in Las Vegas and Macau and Mr Packer’s departure from the company’s board of directors due to mental health issues.

Wynn Resorts in the spotlight

The Sydney Morning Herald has reported explosive allegations that executives at Wynn Resorts had concealed allegations of sexual misconduct against the company’s founder, Steve Wynn, for years, if a report by Massachusetts casino regulators is to be believed.

The 200-page report by the state Gaming Commission doesn’t make a recommendation about the fate of the company’s Massachusetts casino licence or its nearly US$3 billion Boston-area resort slated to open in June.

It does conclude by saying that recent reforms touted by the company – including the resignation of Mr Wynn as chief executive officer and the ousting of every official who knew of the allegations but failed to report them – does not “erase the fact that the corporate failure revealed in this investigation are significant, repetitive and reflective of the company’s historical governance practices.”

Mr Wynn stepped down in February following the allegations.

The board “reluctantly” accepted his resignation at the time, with the company remarking in a statement that they appointed Matt Maddox, its then president, as chief executive officer immediately.

“In the last couple of weeks, I have found myself the focus of an avalanche of negative publicity,” Mr Wynn said in a statement.

“As I have reflected upon the environment this has created – on in which a rush to judgment takes precedence over everything else, including the facts – I have reached the conclusion I cannot continue to be effective in my current roles.”

Wynn had been in the spotlight since the Wall Street Journal published a report in January that alleged he pressured employees for sex and paid US$7.5 million to settle claims brought by a former manicurist at his Las Vegas resort.

Wynn, 76, has denied any wrongdoing, calling the claims “preposterous” and saying they were instigated by his ex-wife to seek advantage in their divorce lawsuit.

His exist sets up a challenge for a company whose glamorous image has long been tied to its founder.

Wynn started in Las Vegas casinos in the 1960s, creating some of Las Vegas’ most iconic landmarks – the Mirage, Bellagio and Treasure Island.

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