Wynn Resorts withdraws Crown takeover offer over ‘premature disclosure’

Wynn Resorts has called off talks over a potential $10bn offer for Crown Resorts blaming prematurely disclosure of their talks.

Wynn Resorts has abruptly called off discussions over a potential $US7.1 billion ($10bn) offer for Crown Resorts saying the takeover target had prematurely disclosed their talks.

Less than a day after Crown Resorts surprised industry watchers by announcing that Wynn Resorts had offered $14.75 a share, Wynn took the deal off the table.

“Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transactions,” the company said in a statement released four hours after a separate statement had confirmed the talks.

Wynn Resorts executives were caught off-guard when Crown disclosed the talks, as Wynn hadn’t been ready to do so, a source said. “I was surprised and the US folks were surprised,” the person said.

The deal would have given the Las Vegas giant a foothold in its second international market, underscoring how casinos are looking beyond the traditional gambling hub of Macau to attract lucrative Asian high-rollers.

Wynn currently runs casinos only in the US and Macau, the southern Chinese territory that is the epicentre of global gaming. Analysts said a move into Australia by Wynn would have complemented its existing business, giving it another option to offer potential VIPs amid concerns that spending on gambling in Macau could fall due to a slowing Chinese economy.

Macau casinos bring in more than five times the annual revenue of casinos in Las Vegas. The contribution from high-rollers to global gaming sits at around 50 per cent, according to data from Union Gaming, an investment bank focused on the sector. That figure has trended lower since 2011, when VIP players accounted for roughly three-quarters of revenue.

Wynn’s offer, which Crown disclosed Tuesday morning Sydney time, valued Crown at a 26 per cent premium over Monday’s closing price. Crown shares jumped about 20 per cent closing at $14.05. Shares of Wynn Resorts fell 3.9 per cent to $US139.26 in US trading, after news that the deal was off.

Company founder Steve Wynn stepped down from Wynn Resorts following a Wall Street Journal investigation detailing sexual misconduct allegations about him. An investigation by Massachusetts regulators revealed last week that company executives ran a sophisticated cover-up to protect Mr Wynn from the allegations.

David Green, a former casino executive turned founder of Newpage Consulting, said a Crown deal could have helped Wynn Resorts to expand regardless of the outcome of the regulatory proceedings in Massachusetts. The company planned to open a $US2.6bn resort there in June, but regulators are reviewing whether it is suitable to hold a licence following the allegations against Mr Wynn.

Killing the deal would make Wynn Resorts look silly, Mr Green said. But after the Massachusetts regulators make their decision, the company could revive the talks. “Prudence would suggest that you don’t try and do a merger deal or acquisition when your suitability is being reviewed,” Mr Green said.

Public companies in Australia were under continuous disclosure obligations, Mr Green said, meaning Crown would have had to disclose information that might affect the way the market trades its stock.

Some, though, viewed Crown’s actions as an attempt to attract other potential bidders to the table to create more of a market for the transaction, which backfired when Wynn Resorts pulled the plug.

“They were looking to do a transaction, not get involved in a bidding war,” said Trip Miller, managing partner of asset manager Gullane Capital Partners.

Before Crown’s original deal talks announcement, its shares were down about 20 per cent from their recent highs, reflecting concerns about main-floor gambling revenue, the company’s efforts to rebuild its VIP business after employees in China were arrested and sentenced for gambling-related crimes, and the progress of new developments in Australia.

In February, Crown chief financial officer Kenneth Barton told investors on a conference call that high-end visitors to the company’s Melbourne property were being cautious about spending. Overall, Crown said high-roller spending fell 12 per cent in the six months ended in December.

“The people at the premium end have been still coming to the property in broadly the same numbers but spending less,” Mr Barton said, according to a transcript. “We’ve seen that also with our VIP customers at the top end as well. And anecdotally, we’ve seen casual restaurants do better than premium restaurants.”

Still, some Wynn shareholders had cheered the proposed deal. Before the company called off the talks, Gullane Capital’s Mr Miller said a move into Australia could serve as a stepping stone to Japan, which recently legalised casino gambling.

Despite the false start, some bankers have said the casino industry is ripe for deal making as casinos look to diversify their offerings, improve margins and lower costs. Just last month, Buffalo, New York-based Delaware North won regulatory approval to buy a casino in Darwin, in Australia’s Northern Territory.

The Wall Street Journal