Packer’s casino deal with Wynn goes bust
Wynn Resorts, angered by Crown’s decision to reveal takeover talks, kill the $10 billion bid.
Las Vegas gambling giant Wynn Resorts last night walked away from its $10 billion takeover talks with the James Packer-backed Crown Resorts, blaming the “premature disclosure” of the deal by the Australian casino major.
The Nasdaq-listed company had been in confidential talks with the Australian-listed casino company but an agreed bid had not been finalised.
Crown yesterday disclosed to the Australian Securities Exchange that it had been in discussion with Wynn about a “change of control transaction”, which would see Mr Packer — who has a 46.1 per cent stake in Crown — walk away with about $2bn and a 10 per cent stake in Wynn Resorts.
But Wynn Resorts abruptly ended those talks with the company’s executives surprised and angered by Crown’s decision to reveal the talks publicly.
“Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transaction,” Wynn said in a statement released overnight.
The Wall Street Journal quoted a person familiar with the matter as saying that Wynn executives were caught off-guard by the Crown announcement. “I was surprised and the US folks were surprised,” the person said.
Some analysts believe Wynn was angered by the announcement seeing it as an attempt by Crown to attract other potential bidders to the table. “They (Wynn) were looking to do a transaction, not get involved in a bidding war,” Trip Miller, managing partner of Gullane Capital Partners told the WSJ. The firm manages around $70 million in assets, with roughly 18 per cent invested in Wynn Resorts.
The talks were believed to have been ongoing for some months and involved a previous offer. Crown said yesterday its board had not yet considered the “most recent” proposal from Wynn.
Crown said the deal had an implied value of $14.75 per share — a 26 per cent premium to Crown’s share price before the bid was announced. Shares in Crown closed 19.6 per cent higher at $14.05 on news of the deal.
However it said the discussions with Wynn were “at a preliminary stage and no agreement has been reached between the parties in relation to the structure, value or terms of a transaction”.
Any deal to sell his casino empire to Wynn Resorts, would have effectively seen the 51-year-old Mr Packer farewell corporate Australia more than a century after his family rose to dominate its business landscape.
Revelation of the talks come weeks after he was named the nation’s 15th richest person in The Australian’s The List, with a net worth of $4.23bn.
The discussions, which signal an exit from Crown, come more than 13 years after Mr Packer was given the keys to the family empire when his father Kerry died as Australia’s richest man, handing his son a $7 billion media and gaming fortune.
James Packer shifted investments away from the family’s traditional Channel Nine television interests and further into the notoriously opaque world of global casino investments and Hollywood movie-making.
But he has faced a series of setbacks in recent years, with his second marriage breaking down and Crown employees in China being jailed, leading him to sell out of his Macau casino interests.
He admitted last year that a cocktail of medications prescribed for a mental health condition made him feel “very dulled” and that he was tired of being on the business “rollercoaster’’.
Crown shares jumped nearly 20 per cent yesterday to $14.05 — the highest in seven months — bringing the company’s total market capitalisation to $9.5bn. The proposed deal would have involved an implied value of $14.75 a share.
But any deal would also cast a shadow over the development of Mr Packer’s dream project, the $2.1bn casino hotel at Sydney’s Barangaroo, with Wynn to face independent regulatory scrutiny.
Wynn is presently facing an investigation over whether it should be allowed to run a new casino in Boston. Executives have been accused of running a “long standing, sophisticated cover-up” to protect company founder Steve Wynn from sexual misconduct allegations made by employees. He stood down as chief executive and chairman of Wynn Resorts last year and has sold his interests in the company.
Mr Wynn was instrumental in gaining Mr Packer access to the lucrative casino market in the former Portuguese colony of Macau.
Wynn Resorts is a substantially bigger operation than Crown, with a reported value of $US15.5bn ($21.8bn). Its shares were listed on the Nasdaq at $US144.85 before US markets opened last night.
The value of Crown — of which Mr Packer holds a 46.8 per cent stake — had fallen by about 20 per cent since the middle of last year, fuelled by lower-than-expected profits. This was blamed on a decrease in spending by wealthy Asian gamblers, principally because of lower Chinese growth and complex trade relations with the US.
Crown casino, which rose from the banks of the Yarra River under the Kennett government in the 1990s, became Victoria’s biggest tourist attraction and an employer of thousands after $2.2bn was pumped into the building.
Crown Resorts said yesterday that discussions were under way, with its board yet to consider Wynn Resorts’ most recent proposal. “Crown confirms that it is in confidential discussions with Wynn regarding a potential change of control transaction following approaches to Crown by Wynn,’’ it told the Australian Securities Exchange. “The proposal contemplates an acquisition of Crown by Wynn via a scheme of arrangement for a combination of cash and Wynn shares.
“The proposal is subject to a number of conditions, including due diligence, Wynn obtaining all necessary regulatory approvals and a recommendation by the Crown board. It is stated to be preliminary, confidential, non-binding and indicative.’’
Lloyd Williams, who built Crown casino in Melbourne in 1997 before it was sold to Kerry Packer, yesterday acknowledged the building’s impact on the city.
“A lot of people were anti-casino. But when you think about Crown and the way we built it, it is retail and restaurants and entertainment. It probably gave Melbourne its first top-class hotel,’’ Mr Williams said.
Mr Packer has had a strong interest in the development at Barangaroo, due to be opened in 2021, but spends most of his time in the US, where his three children live with their mother, his former wife Erica Baxter. Mr Packer, who has been married twice, has been plagued by personal strife in recent years, including a notoriously public split with singer Mariah Carey and a legendary footpath brawl with former best friend and Nine Network chief executive David Gyngell in May 2014. Mr Gyngell later took full responsibility for the fracas.
Mr Packer and his elder sister, Gretel, split their family assets in 2015 and reportedly fell out during negotiations, although The Australian has reported that they are now on better terms.
In 2016, 19 Crown 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 about a month’s detention.
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