There was nothing concrete it could tell the market, or its regulators, about a proposal to spend $10 billion on a company they would know little, if anything, about and in a jurisdiction they would be unfamiliar with. There was also the potential that the early disclosure of its interest would either flush out competition or give Crown’s board more leverage to extract a higher price.
The timing of the disclosure couldn’t have come at a more sensitive moment for Wynn.
Last week gaming regulators in Massachusetts held a hearing to determine whether Wynn was a suitable company to hold a gaming licence in the state. Wynn has been building a $US2.6 billion casino and resort complex in Boston. Encore Boston Harbor is scheduled to open in June.
The hearing relates to the multiple allegations of extremely serious sexual misconduct against the company’s founder, Steve Wynn, and allegations that the group’s senior executives oversaw very sophisticated cover-ups, over years, of expensive settlements with half a dozen or so female employees.
Wynn was forced out of the company he built, and forced to sell his Wynn shares last year, while the company was fined $US20 million by the Nevada regulator.
The Massachusetts hearings are potentially more threatening, given that the regulator has said it would consider whether Wynn should retain its licence. Its investigators have also, according to the Wall Street Journal, asked the regulators to consider the extent to which Wynn’s current chief executive, Matt Maddox, and some current board members knew of the settlements.
While it is considered unlikely Wynn would lose its licence and be forced to sell the Boston complex – another fine is probably more likely – Wynn would be sensitive to the need not to needlessly stir up its regulators by blind-siding them with a $10 billion deal.
It would also have been extremely conscious of the implications of the premature disclosure for its shareholders.
The Wynn share price is volatile enough without having the prospect of a $10 billion-plus cross-border deal – involving a lot of Wynn scrip but with no definitive price or terms locked in – hanging over it for weeks, if not months.
It would also have been aware, once the existence of the negotiations had been flushed out, that the pressure to get a deal done quickly would hand the Crown board greater leverage to extract another price increase and/or the tweaking of the proportions of cash and scrip in the offer and would alert any potential counter-bidders, which could pitch it into a bidding war.
In the circumstances, it probably thought it had no option but to walk away. The critical question is whether it has gone for good.
Wynn knows James Packer is a willing seller, to Wynn at least, of his 46 per cent stake in Crown. It knows, broadly, the price and terms required to get the deal across the line.
The logic of bringing together Crown’s premium casino-based resort properties with Wynn’s casino complexes in Las Vegas, Boston and Macao, which are also at the premium end of the market, to create an international business and an international casino circuit for high-rollers hasn’t suddenly evaporated.
If the concept of acquiring Crown made sense on Monday it remains sensible and attractive today, tomorrow and the days, weeks and months after.
While Wynn said in its US Securities and Exchange Commission filing that it had “terminated all discussions with Crown Resorts Ltd concerning any transaction,” that doesn’t rule out a return to the negotiating table in future, once the question mark over its Boston casino has been resolved and speculation of a deal dissipates.
Now that its interest in Crown has been exposed, Wynn will also have some feel for how its shareholders and the market-at-large might react to a deal and, of course, its regulators have now been forewarned of its possibility.
The Wynn deal appears dead but Packer’s demonstrated willingness to contemplate the sale of his Crown shareholding means it, or something like it from a third party, remains a possibility.
Stephen is one of Australia’s most respected business journalists. He was most recently co-founder and associate editor of the Business Spectator website and an associate editor and senior columnist at The Australian.