James Packer puts up the ‘for sale’ sign on Crown Resorts
The proposed $10 billion bid for James Packer’s stake in Crown Resorts collapsed due to a leak.
It may not be exactly the scenario he envisaged but James Packer has now effectively put a “for sale’’ sign on his major stake in Crown Resorts (ASX: CWN) and the company in general.
The collapse of the A$10 billion proposed bid by US gaming giant Wynn Resorts is certainly not an ideal situation given that both sides to the deal would have rather unveiled it once it was effectively wrapped up and ready to be announced as a scheme of arrangement.
That didn’t happen and instead the earlier negotiations became public before the final price and terms had been agreed to.
Early leak leads to No Wynn situation
That resulted in a very tricky “No Wynn” situation, particularly given the extreme sensitivity around casino purchases which involve plenty of regulators – not to mention the shareholders in both sets of companies.
The Wynn deal effectively fell over before it could be finalised when Crown was forced by the ASX continuous disclosure rules to reveal the negotiations on Tuesday; although it wouldn’t be a total shock if Wynn’s global casino company returned to the table at a later stage.
That return may not be with the same $14.75 a share cash and scrip offer that was outlined on Tuesday.
There is certainly some industrial logic and synergy between the two premium casino groups, with Crown’s Australian resort casinos in Melbourne and Perth plus the planned Crown Sydney casino being constructed in Barangaroo a good fit with Wynn’s casinos in Las Vegas, Boston and Macao.
Together they would create a bigger international casino network that could more effectively tap into the international high roller market which requires top quality accommodation and resorts in exchange for significant casino turnover and profits.
Wynn empire in delicate negotiations with regulators
The problem for the Wynn empire was that it is in the middle of sensitive regulatory negotiations to determine if it is a suitable company to hold a casino licence in Massachusetts which is essential if it is to open its US$2.6 billion casino and resort complex in Boston.
The Encore Boston Harbor is due to open in June but the opening has been complicated by several allegations of serious sexual misconduct against the company’s founder, Steve Wynn, and allegations that the group’s senior executives oversaw cover-ups of expensive settlements with several female employees over a long period of time.
Steve Wynn is no longer a shareholder in the group after being forced to sell his Wynn shares last year.
The Wynn company was also forced to pay a US$20 million fine by the Nevada regulator and the Massachusetts issue is a difficult one because of the extensive cover-up by the company of the Steve Wynn settlements.
A little like Watergate, it is the cover-up that causes the major problem rather than the original sexual harassment issue.
In the middle of that regulatory quagmire the Wynn group could simply not afford to be seen to be negotiating a A$10 billion takeover as well, so the deal has been put on ice, for now.
Plenty of other players willing to gamble on Crown
What the interim collapse of the Wynn deal does do is focus attention on the fact that James Packer’s 46.1% stake in Crown is up for sale – all that needs to happen is for the right price and terms to be agreed on.
That might be more difficult with a casino company compared to a conventional company due to the much tighter regulatory oversight, there is no shortage of international casino groups in Asia and the US that may want to get their hands on the largest single shareholding in Crown.
Whether James Packer will sell to them is an open question but it wouldn’t be a massive surprise if he was fielding a few calls from casino groups that want to add Australia to their list of gambling destinations.