Wynn Resorts scotches potential takeover of Crown Resorts

Wynn Resorts has abandoned plans to take over James Packer’s Crown Resorts after news of talks between the two were publicised - and the market reaction has been just as swift.

Wynn Resorts has pulled the plug on a potential takeover of Australian gambling giant Crown Resorts that was reported to have been worth $US7.1 billion ($A10 billion).

Both companies had previously confirmed the talks.

“Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transaction,” Las Vegas-based Wynn said on Tuesday (local time).

Wynn Resorts said it was pulling the plug on a potential takeover of Australian gambling giant Crown Resorts. Picture: AFP

Shares of Wynn were down 3.2 per cent at $US140.23 ($A196) in New York. Crown on Tuesday had described Wynn’s proposal as consisting of 50 per cent cash and 50 per cent Wynn shares, describing the talks on a “potential change of control transaction” as being at a “preliminary stage.”

The news had lifted shares of Sydney-listed Crown by nearly 20 per cent on Tuesday.

But on Wednesday, after news of the dead deal broke, Crown shares slumped from a high of $14.25 to $12.75 around 10.45am AEST.

RELATED: Vegas giant’s $10b bid for Crown

RELATED: James Packer quits family business

RELATED: Packer quits over ‘mental health’

Steve Wynn sold his stake in the company he founded earlier this year. Picture: AFP

James Packer formerly headed up Crown Resorts but departed amid mental health issues. Picture: Getty Images

WHY WYNN WITHDREW FROM DEAL

Wynn’s inexperience with pursuing big deals was likely a factor in the sudden pulling out, market analysts stated.

“(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.

Crown has undergone significant restructuring in recent years and divested itself of several overseas interests.

A crackdown by Beijing has driven away many big-spenders and hurt revenues. Around the same time, several of its employees were detained in China before being released in 2017.

Crown Casino in Melbourne. Picture: Supplied

WHAT DEAL WOULD HAVE MEANT FOR PACKER

Last year, Australian tycoon and former Crown head James Packer, son of the late publishing and gaming mogul Kerry Packer, abruptly departed the family firm, citing “mental health issues,” though he remains a significant shareholder.

The Wynn deal would have ended Packer’s career as a casino mogul with a $US4.7 billion payout.

He would have ended up as Wynn’s biggest shareholder with 9.8 per cent of its shares, based on its current number of shares on issue.

But at least one market analyst believed the withdrawal may not be the end of discussions.

“We think Wynn’s strategy was mostly defensive, but if they have a strong strategic rationale for wanting to acquire Crown, they would likely come back to the table when things settle down,” said John DeCree, Union Gaming Securities’ director of North America research.

Wynn Resorts expanded into China. Picture: Bloomberg

Wynn Resorts, which employs 23,000 people around the world, operates casinos in Las Vegas and Macau and was founded in 2002.

Wynn himself started his casino business in Las Vegas in the 1960s and created some of the city’s most iconic landmarks - the Mirage, Bellagio and Treasure Island - before selling them.

He sold his entire stake in the Las Vegas-based firm after he stepped down earlier this year as chairman and chief executive in the wake of allegations of decades of sexual misconduct.

Originally published as Wynn Resorts scotches potential takeover of Crown Resorts