We’ve seen this story before. Steve Wynn gets in trouble with investors, causing his stock to sink, and eventually, a competitor comes in with a hostile bid and buys out his company. Last time, it was Steve Wynn’s extravagant art habit that led to MGM Resorts(NYSE: MGM) buying Mirage Resorts in 2000. This time it’s sexual misconduct allegations that could putWynn Resorts, Limited(NASDAQ: WYNN) in the crosshairs of competitors.
The buyer pool won’t be big for Wynn Resorts given the regulations in gaming and the $24 billion-plus price tag to buy the company. But it would be surprising if a few companies didn’t kick the tires to see if a deal can get done.
Image source: Getty Images.
Who could buy Wynn Resorts?
A few names come to mind as potential Wynn Resorts buyers. Las Vegas Sands(NYSE: LVS) could acquire the company with cash and debt, potentially not even using its own stock as currency. The deal could consolidate power on the north end of the Las Vegas Strip with The Venetian and The Palazzo across the street from Wynn Resorts and its new plot of land across the Las Vegas Strip. Controlling three valuable parcels and two of Macau’s most profitable resorts would be attractive for Sands CEO Sheldon Adelson.
It would be all too fitting if MGM Resorts acquired another of Steve Wynn’s creations, although the deal would be more of a stretch. MGM would likely need to use stock as part of the deal, which may be palatable to Wynn Resorts investors if the price is right.
Another interesting potential buyer could be Caesars Entertainment(NASDAQ: CZR). the newly revitalizedgaming company with a large piece of the Las Vegas Strip. Caesars would covet Wynn Resorts’ gaming licenses in Macau and Massachusetts and may be willing to pay a premium to acquire them. But Caesars is too small to be a likely acquirer, with its $9.5 billion market cap meaning that the company would have to use an incredible amount of stock or debt to make a deal happen even if it might otherwise be worth it.
Why Wynn Resorts would be a good buy
Wynn Resorts is one of just six companies with a lucrative gaming concession in Macau and the only one with a gaming concession near downtown Boston. Then there’s the resort and undeveloped land the company owns in Las Vegas, perfectly positioned on the north end of the Las Vegas Strip. The assets themselves are attractive, but they come with cash flow as well.
You can see in the chart below that Wynn Resorts generated about $1.5 billion in EBITDA over the past year, resulting in an enterprise-to-EBITDA value of about 15.9. What this ratio doesn’t include is any revenue from Wynn Boston Harbor or future growth we’ll likely see from Wynn Palace in Macau.
Long-term, EBITDA of around $2.4 billion annually is likely within reach, leaving a buyer with an EV/EBITDA value of 10, which would be an attractive multiple for any gaming buyer.
Will Wynn Resorts seek a buyer?
I don’t think it’s likely that Wynn Resorts will seek a buyer, but it’s possible that a hostile bid will be presented to the board of directors. That’s how Mirage Resorts was sold to MGM Resorts nearly two decades ago, and it could happen again. Given the assets Wynn Resorts has that are coveted by others in the gaming industry, a buyout isn’t out of the question by any stretch. Caesars is my pick to be the one to put the most value on a Wynn Resorts buyout in 2018.
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