Wynn Resorts Stock Falls as It Nixes Possible Takeover of Crown Resorts - Barron's

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Wynn Resorts stock had a turbulent morning on Tuesday, as reports of a possible takeover of Crown Resorts led Wynn to say it was terminating those discussions.

Australia-based Crown Resorts had said the companies were discussing a 50% cash, 50% stock proposal totalling $7.1 billion. Wynn stock was already down Tuesday morning on news of the potential deal before Wynn nixed it.

The back story. Wynn Resorts stock (ticker: WYNN) has gained more than 46% in 2019. The Las Vegas-based resort company got a boost earlier this month when improved Chinese manufacturing numbers signalled good things to come at its Macau resort. A significant portion of its sales come from Chinese consumers spending money there.

Jefferies analyst David Katz upgraded Wynn to from Hold to Buy on Monday, saying his bullishness stemmed from “better than expected GGR results, regulatory developments for competing companies/markets,” as well as a possible economic rebound in China.

He saw the upcoming Encore Boston Harbor property and gains in the mass market segment as positive factors going forward. He added that average earnings estimates for Wynn could climb by as much as 10% if the Macau resort rebounded stronger than expected.

What’s new. Following initial reports of deal talks, Crown Resorts confirmed Tuesday that it was in confidential discussions about a possible takeover by Wynn. The offer was arrangement of 50% cash and 50% Wynn stock, totalling $7.1 billion. The implied value of Crown being discussed was 14.75 Australian dollars per share.

Wynn initially confirmed preliminary discussions in a regulatory disclosure, but announced just after the opening bell on Tuesday that it was terminating the discussions citing, “premature disclosure of preliminary discussions.”

Crown didn’t immediately respond to a request for comment.

Wynn stock dipped in early-morning trading and was down 3.8% by mid-morning, to $139.35 per share.

Looking ahead. JPMorgan analyst Joseph Greff already had reservations about the possible deal.

“Given U.S. equity investors’ general lack of familiarity with the Australian gaming market(s), ourselves included, we think this likely causes some pause in the recent share price momentum, given this, as well as a potentially lengthy probity review (and we know from past U.S. gaming transactions, stocks can be stuck in deal purgatory between announcement and close),” he wrote in a note to clients

Maybe it’s all for the best.

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