International edition
April 24, 2019

Both companies' shares fell after Wynn's backtracking

Wynn Resorts ends talks with Crown Resorts after takeover offer disclosure

Wynn Resorts ends talks with Crown Resorts after takeover offer disclosure
“Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transaction,” Wynn said in a written statement released on Tuesday in the US.
United States | 04/11/2019

After an Australian newspaper revealed the takeover approach, Crown confirmed the confidential talks and disclosed the price that Wynn was offering, which valued Crown at around USD 7.1 billion buyout. Crown stock dropped 10 percent at the open, then pared some losses to trade 8.5 percent under Tuesday’s closing price. Wynn shares fell almost 4 percent in New York.

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ynn Resorts abruptly ended buyout talks with Australia’s largest casino operator Crown Resorts after word of a potential takeover was leaked. In a brief statement, the Las Vegas casino firm said it was ending all discussions with Crown Resorts.

Earlier in the day, the James Packer-controlled gaming company had confirmed that it was in acquisition talks with Wynn. “Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transaction,” Wynn said in a written statement released on Tuesday in the US.

Crown, which owns casinos in Melbourne, Perth and London and will soon open another in Sydney, revealed that the offer had an implied value of AUD 14.75 per share, to be paid 50% in cash and 50% in Wynn shares. That offer would have valued Crown at around AUD 10 billion (USD 7.1 billion) buyout. Crown shares jumped as much as 22% on the news.

Crown confirmed the development on Wednesday in an ASX statement. “Crown notes that Wynn has announced that it has terminated all discussions with Crown concerning any transaction,” the company said.

“Wynn’s actions are more likely to reflect a genuine frustration with a breach of the confidential nature of the discussions than an attempt to add pressure to the negotiation,” said Angus Gluskie, managing director of White Funds Management, as reported by Reuters.

Crown stock dropped 10 percent at the open, then pared some losses to trade 8.5 percent under Tuesday’s closing price, while the broader market fell 0.1 percent. At AUD 12.86, the stock remained almost 10 percent higher than its last price before Wynn’s approach was disclosed, suggesting hope for a deal had not completely evaporated. Wynn shares fell almost 4 percent in New York on Tuesday.

This turnaround can make deal negotiations more difficult by emboldening acquisition targets to drive a hard bargain, analysts quoted by The Guardian said. In this case, Wynn’s inexperience with pursuing big deals also likely played a factor, some analysts added.

“(Wynn) management’s experience with acquisitions is limited, so when you target synergies it’ll be nice to have more of a track record for such a large transaction,” said Roth Capital Partners analyst David Bain, calling the termination of the deal talks a positive development for Wynn.

After the Australian Financial Review revealed Wynn’s takeover approach, Crown not only confirmed the confidential talks on Tuesday, but also disclosed the price that Wynn was offering. It added that Crown’s board had not yet considered Wynn’s latest offer. Wynn then issued two statements, first confirming the talks, and, a few hours later, stating that they had ended. Crown did say, before Wynn walked away, that there was no certainty of a deal.

Crown’s value has fallen 20% since mid-2018 as profits have fallen short of expectations. It has attributed the slump to slowing economic growth in China, where big gamblers who traveled to Australia are now less likely to be willing to gamble.

Wynn Resorts Ltd runs several casinos in the United States and Macau. Its founder, Steve Wynn, resigned as chairman and chief executive in February 2018 after claims of sexual misconduct, and has sold his stake in the company.

Crown has battled controversy in the past three years as well. In 2016, 19 of its staff members were arrested in China on charges of illegally promoting gambling. A court jailed 16 of the defendants, including three Australian citizens, for nine-to-10 months, with the remaining three released after around a month in detention.

Soon afterward, Crown signaled a retreat from international expansion plans that included Las Vegas and Macau. That led to a USD 370 million deal to sell Wynn vacant land in Las Vegas on which Crown had planned to build a casino. And in March last year, Crown’s billionaire director Packer resigned from the company’s board, citing mental health issues. He still owns 46.8% of the company.

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