Australian billionaire James Packer is understood to have approached Wynn Resorts some time ago about whether it would be interested in his Crown Resorts business, making the move before the group came forward with a $10 billion takeover approach.
Overnight Wynn Resorts said it had terminated takeover talks with Crown due to “premature disclosure of preliminary discussions”, pulling the pin after Crown announced on Tuesday that Wynn had come forward with a 50-50 cash and scrip offer for the business, at $14.75 per share.
Crown’s revelation followed media reports of talks between Crown and Wynn. Crown first entered a trading halt then made a statement to the market about the proposal, detailing the nature of the offer and the price.
DataRoom understands that the story that helped torpedo the deal was in fact leaked by or on behalf of the senior Crown sources because of growing scepticism over whether Wynn would be in a position to deliver on its offer, due to the challenges it has been facing in the United States.
Buying Crown was seen as too much, too soon in the light of Wynn’s challenges closer to home.
Las Vegas-based Wynn has been under a cloud after its former chief executive and founder, Steve Wynn, was accused of sexual misconduct. Mr Wynn denied the allegations reported in The Wall Street Journal.
But following the reports, Wynn Resorts has been under heightened regulatory scrutiny, the extra attention coming at a time when it has been embarking on a $2.5bn casino development in Boston, currently subject to a Massachusetts Gaming Commission hearing.
By revealing details of the value of Wynn’s proposal, it is thought that Crown’s board was drawing a line in the sand with respect to price.
Should other suitors come forward, the details revealed by Crown mean they would know that they would need to come up with an offer for the business close to $10bn, and that a cash and scrip deal could be acceptable.
Those close to the situation say that Mr Packer, who owns 47 per cent of Crown, has been eager to sell the business for some time.
Some say that the reason he stepped off the company’s board a year ago was so that he would be free to discuss a sale with various parties.
Mr Packer made the move around the same time that Steve Wynn resigned from Wynn Resorts amid the sexual misconduct allegations.
The Wynn and Packer families are well known to each other, and after Mr Packer approached Wynn Resorts about its interest, it was then understood that Wynn approached Crown itself.
Other parties, likely to be the major casino operators and some private equity firms, were also thought to have been approached by Mr Packer
Crown is seen as a highly profitable and safe casino business that would be extremely attractive to another operator, or to private equity firms, which would be likely to need to embark on any deal as part of a consortium.
The big attraction of Crown for other gaming operators is that, with about 40 per cent of its earnings coming from stable markets, it provides a platform to expand into more risky environments, funding any move with those quality earnings.
Of the operators, Malaysia’s Genting is known to be an eager suitor of Crown. It has previously tried to enter the Sydney market and owns a stake in Crown’s smaller rival The Star Entertainment Group.
The Las Vegas Sands Corporation is also thought to be interested and would be big enough to buy the business for cash.
Founded and run by Sheldon Adelson, Las Vegas Sands Corporation is said to generate about $4.5bn from its Singapore Marina Bay Sands casino. And with a successful operation already in Singapore, an expansion into Australia makes sense.
While the deal may be too big for MGM Resorts International, some say it could still buy Crown and pay for the company with its own shares.
Of the private equity firms, some say that US-based private equity firm Colony Capital, which owns the Fairmont Hotels & Resorts, would like to own Crown, but would need a partner.
Colony was Crown’s partner on its Las Vegas development a decade ago.
TPG Capital founding partner David Bonderman is also known to have been interested in casinos for some time, but has been hesitant about investing in Las Vegas or China.
Observers also say that it is also worth not discounting Brookfield, which is embarking on a major development at Sydney’s Wynard Station that is connected via a walkway to Barangaroo.
Of the global private equity funds, Brookfield would be one more capable of handling the size of the deal and has recently been venturing into new areas of investment such as education and healthcare.
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