The casino market was surprised yesterday when reports surfaced of a potential A$10 billion (US$7.1 billion) takeover bid being made by Wynn Resorts to take over Australia’s Crown Resorts. However, less than 24 hours after the news broke, Wynn Resorts has confirmed that it has decided to scrap all negotiations concerning the proposal.
The world’s second largest casino operator made a takeover approach for Crown Resorts in a bid to expand its international reach, given the growth challenges it currently faces in Asia. The deal could have resulted in Wynn’s acquisition of two Australian casinos, as well as a new casino establishment that is still under construction on the Sydney harbor front.
The takeover could have been a hedge for Wynn against Asia’s gambling epicenter Macau, where the company’s licenses are still up for renewal.
Nine News Australia
Negotiations Leaked by Media
News of the proposed deal led to Crown shares jumping 22% to A$14.37 in Sydney, which marked the company’s biggest intraday gain in 12 years. The takeover approach was confirmed by Angus Gluskie of White Funds Management, a company that holds Crown shares. Gluskie announced that the talks were still in their preliminary stages, requiring more debate on pricing and strategic merit.
Not long after news of the negotiations was leaked to the public by the media, Wynn announced that they have terminated the talks with Crown Resorts. The buyout could have been Australia’s biggest M&A deal in 2019.
Wynn “Inexperienced” With Massive Acquisitions
Experts are now saying the backtracking could have something to do with Wynn’s lack of experience in pursuing massive deals. David Bain, analyst with Roth Capital Partners said Wynn Resorts had limited experience when it came to massive acquisitions involving such a huge sum of money. Bain said the termination of the talks is actually a positive development for the company.
News of the deal broke late Tuesday, with Crown confirming the confidential negotiations. The company also revealed the price offered by Wynn, saying its board had not yet considered the offer. Wynn initially confirmed the buyout offer, only to issue a statement shortly after that the talks had ended.
Wynn’s backing out of the talks demonstrates a lack of conviction on its part. Wynn Resort shares declined 3.2% and dropped to $140.21 in New York. The company now joins a list of firms who have jumped the gun in terms of pursuing a major acquisition only to back out a short a while later.