Wynn Resorts (NASDAQ:WYNN) isn't standing pat with its current roster of resorts in the U.S. and Macau. It was reportedly eyeing Australian casino operator Crown Resorts in a deal that could cost $7 billion in a cash and stock deal, according to CNN.
Talks were ended, or at least put on hold, by Wynn after media began to report on the talks. Wynn clearly didn't want the news to become public, but that doesn't mean they couldn't pick up in coming weeks. A deal, after all, could make sense for both sides.
Who is Crown Resorts?
Crown Resorts is one of the largest casino operators in Australia, with operations in Melbourne, Sydney, and Perth. It also owns a high-end casino in London, so it owns highly coveted assets.
The company has also consolidated operations in recent years, selling its stake in Macau-based Melco Resorts (NASDAQ:MLCO) and a 34-acre site on the Las Vegas Strip for $338 million to none other than Wynn Resorts. What's left is a company with rare operations in Australia and London and potentially a lot of motivation to sell.
Why Crown Resorts wants to sell
From Crown Resorts' perspective, a sale seems almost inevitable. Former CEO James Packer, who built the company to what it is today and owns 47% of its stock, left the company last month due to health concerns. He may be interested in simply cashing out instead of owning a large stake in the company, leading to the talks with Wynn in the first place.
Crown Resorts has also been shedding assets lately, and this may just be part of a long unwinding of the company. Given its current size, there are only a handful of suitors so it makes sense that management would at least listen to Wynn Resorts.
Wynn may be getting aggressive
The thought of acquiring Crown Resorts isn't something investors would normally associate with Wynn Resorts. When Steve Wynn ran the company, he would normally grow organically by building resorts he helped design. Acquisitions haven't been a big part of his growth strategy for 30 years.
However, new CEO Matt Maddox is putting his own stamp on the company and may be looking at acquisitions differently. If the right deal comes up, he's going to jump on it, especially when it spreads the company's operations to new markets that would be hard to reach organically.
Hold the phone
Wynn Resorts has said that deal talks are off with Crown Resorts because of leaks to the media, but investors shouldn't assume a deal is entirely dead. Depending on Crown's motivations to sell, the company may be looking for bidders and Wynn Resorts makes a lot of sense as an owner given its similar high-end clientele and its desire for diversification. I think this deal is far from dead.