Wounded animals make great prey – Whether in the wild or in business. In that light, rumours that Crown Resorts Ltd (ASX: CWN) has attracted the attention of NASDAQ-listed Wynn Resorts, Limited shouldn't come as much of a surprise to followers of Crown.
The CWN share price has been a long-time underperformer and has plunged close to 20% since the August reporting season when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is hovering around breakeven.
Australia's largest casino group has been struck by a number of issues, including its disastrous Macau joint venture, the exit of its high-profile boss James Packer due to personal health issues, a slowdown in VIP spending at its casinos and problems with its massive Barangaroo project in Sydney.
Opportunistic bid
The approach by Wynn looks opportunistic, although no one will blame Wynn for pouncing on the opportunity (assuming the speculation holds water).
The Australian Financial Review reports that Wynn had recently lobbed a confidential takeover proposal to Crown's board to test interest in the merger.
Crown had reportedly called UBS and Goldman Sachs to lead its defence before rejecting the proposal, according to the AFR.
Devil's in the details
What's notable is that Packer and Wynn's founder and ex-CEO, Steve Wynn, are believed to be good friends and the companies have even partnered on projects in the past.
While Packer isn't involved in the operations of Crown, what he says and thinks will make a big difference given that he's the largest shareholder with around a 46% stake.
This isn't the first time takeover rumours have swirled around Crown. As I said, it's been in the doghouse of a while. There was even talk that Packer would do a management buyout before he stepped down as CEO of Crown.
Can Wynn go hostile?
Wynn Resorts has a market cap of more than US$15 billion ($21 billion) while Crown has a market cap of $14.5 billion. The US suitor reported a 2018 net income of around $806 million compared to Crown's normalised net profit of over $300 million.
If Wynn wanted to win support from other Crown shareholders, it may also need to think about keeping an Australian listing as local fund managers who can't invest overseas may be more reluctant to back any takeover given the limited choices in the sector.
It's too early to say if a firm bid will materialise though and it looks like Wynn may not have the stomach for a hostile bid given that it has around US$2 billion in its coffers.
Shareholders should watch this space.
