Wynn’s grand plan for Crown

Wynn Resorts’ takeover approach for Crown included a proposal to create a network for the world’s top VIP gamblers.

Wynn has abandoned its $10 billion proposal for Crown. Picture: Getty Images

Wynn Resorts’ $10 billion takeover approach for Crown Resorts included a proposal to tap more lucrative high-rollers by creating a global high-end network for the world’s top VIP gamblers across its Las Vegas, Macau and Australian resorts.

The rationale for Wynn’s initial approach was to discuss a strategy linking Crown’s Melbourne, Sydney and Perth casinos with its own successful operation running some of the most profitable VIP gaming tables in Macau and Las Vegas, sources close to the deal told The Australian.

Wynn’s US investors were initially blindsided by the company’s unexpected foray into Australia, which is considered a relatively mature market with solid growth prospects ahead.

It is understood Wynn’s pitch included plans as to how it could move its most lucrative gamblers across the three countries and give Crown a bigger slice of the Chinese market as it looks ahead to the opening of its Sydney casino.

Crown’s board is thought to have convened on Tuesday after news of the deal first broke, and has not ruled out a reshaped bid from Wynn re-emerging in the months ahead, despite its tersely worded statement yesterday pulling out of the deal.

Crown shares closed down 9.1 per cent yesterday at $12.77, shedding half of the previous day’s gains.

Casino industry expert David Green said Wynn Resorts might not have been in a position to make a binding offer for Crown as it was still awaiting regulatory clearance from gaming authorities in Massachusetts, following an inquiry into the company’s handling of allegations of sexual misconduct by its former chief executive, Steve Wynn, who left the company last February.

Mr Green said he did not think there was any likelihood of negotiations between Wynn and Crown getting back on track until after Wynn learned the outcome of the inquiry by the Massachusetts Gaming Commission.

The Massachusetts commission has just finished a three-day hearing into Wynn Resorts’ handling of the sexual allegations against its founder, which included testimony from its current chief executive Matthew Maddox who worked closely with Mr Wynn during his career at the casino operator.

In a worst-case scenario, it could see the commission revoke the licence which would jeopardise the future of its $US2.6 billion ($3.6bn) Encore casino/hotel complex on Boston Harbour, which is due to open in June.

The commission is inquiring into whether Wynn Resorts purposely withheld information on the allegations against Steve Wynn to improve its prospects of winning an $US85m gaming permit in the state.

The five-member commission has finished its public inquiry but has yet to hand down its finding. It chair, Cathy Judd-Stein, has said the commission would “take our time making a decision.”

Now based in Melbourne, Mr Green spent many years consulting on the casino business in Macau, starting from 2002 when he helped to advise the Macau government on opening up its casino industry.

He told The Australian it appeared that Crown felt it needed to keep the market informed of its talks with Wynn given the continuous disclosure requirements of the ASX.

He said Wynn Resort’s sudden withdrawal from the talks raised the question of “whether the disclosure (to the ASX) was an accurate representation of what may have been discussed or put to it (Crown) by Wynn.

“A better approach may have been to wait until an offer crystallised and then to enter into a trading halt to determine what to release to the market,” he said.

US broker Union Gaming said the disclosure by Crown may have been used to entice a deal from others in the market.

“To see Wynn move into an M&A strategy was a divergence from their typical core competency. So we’re not surprised to see Wynn walk away,” Union Gaming analyst John DeCree said.

“The fact that some of the details were disclosed — that Crown disclosed in their filing a bit more than we typically see in the US filings about pending M&A or talks and that — likely scared Wynn Resorts away. It seemed like a plea from Crown to attract some other interest and possibly help get that price up and that valuation up a little bit.”

Mr Green said Crown could be attractive to a foreign bidder because of its long licences and the stability of the market in Australia.

But he said the VIP market in Australia was at risk from “shrinkage”.

And he said he expected that Wynn Resorts would be far more interested in expanding into the Japanese market, which was in the process of opening up, “rather than a mature and politically sensitive market such as Crown operates in Australia.”

He said the Japanese market was the big focus at the moment for potential investors in the casino business in Asia.

Mr Green said he doubted if the Malaysian-based Genting casino group would be interested in making a bid for Crown given its operations in Malaysia, Singapore, and the UK and the potential of markets in Las Vegas and Japan.

“Genting has Las Vegas and Japan either in prospect or under development and a substantial additional investment to manage in Singapore,” he said. “I doubt if it would be interested in Crown.”

Genting is one of two operators of integrated resorts in Singapore with a casino/hotel complex on Sentosa Island.

The Malaysian group operated the casino in Adelaide for some years in the 1990s.