Macau-based casino operator Galaxy Entertainment Group Ltd is acquiring an estimated 5-percent stake in U.S.-based firm Wynn Resorts Ltd, the latter announced in a press release on Thursday.
Wynn Resorts is the parent company of Wynn Macau Ltd, a market rival of Galaxy Entertainment in Macau.
Wynn Resorts also announced on Thursday that former company chairman and chief executive Steve Wynn had reached an agreement with “two long-term institutional investors, both of whom are currently investors in Wynn Resorts”, to sell his remaining shares in the company.
According to Thursday’s press release, Galaxy Entertainment “has agreed to purchase 5.3 million primary shares of Wynn Resorts at a price of US$175 a share, resulting in US$927.5 million of gross proceeds to Wynn Resorts.”
Galaxy Entertainment vice chairman Francis Lui Yiu Tung said in a prepared statement included in the release: “This is a unique opportunity to acquire an investment in a globally recognised entertainment corporation with exceptionally high quality assets and a significant development pipeline”.
In a separate Thursday release, Wynn Resorts announced it intended to “use the net proceeds from that [sale] to repay amounts to be borrowed under the 364-day term loan facility contemplated by the commitment letters that the company entered into on March 9, 2018, with an affiliate of Deutsche Bank Securities in an aggregate principal amount of up to US$800 million.”
Commenting on the deal between Galaxy Entertainment and Wynn Resorts, brokerage Union Gaming Securities Asia Ltd said that, “ultimately, should this progress to an acquisition scenario, we think Galaxy Entertainment is only interested in Macau, and would therefore seek to concurrently sell the United States assets (Las Vegas and Boston).”
Analyst Grant Govertsen added: “In Macau, and considering Galaxy Entertainment’s long-term strategic view that Cotai represents the future … we could see another trade go up with another entity acquiring [casino hotel] Wynn Macau on the peninsula. Keeping Wynn Palace on Cotai would give Galaxy Entertainment the premier high-end asset in that geography (further cementing their status as the premium high-end operator), while also giving them further growth pipeline in the Phase 2 site at Wynn Palace. Combined with Phases 3 and 4 at Galaxy Macau, and Broadway, this would give Galaxy Entertainment no less than four major projects [in the Cotai district].”
Galaxy Entertainment announced earlier this week it had been granted a provisional gaming licence by the Philippine Amusement and Gaming Corp (Pagcor), the casino regulator in that country. The Hong Kong-listed firm unveiled in December a US$500-million investment for the holiday island of Boracay, in partnership with Philippines-based Leisure and Resorts World Corp. The latter company has interests in the land-based and online gambling sectors in the Philippines.
Galaxy Entertainment acquired a 5-percent stake in Monaco casino firm Société des Bains de Mer et du Cercle des Étrangers à Monaco, also known as SBM, in July 2015. Last year, the two firms announced what was termed a strategic partnership.
Both Galaxy Entertainment and Wynn Resorts have shown strong interest in bidding for a gaming business in Japan, as local authorities move to regulate casino gambling in the country.
Steve Wynn to sell remaining shares
Wynn Resorts also announced on Thursday that “two long-term institutional investors, both of whom are currently investors in Wynn Resorts, have agreed to purchase the remaining 8 million shares held by founder and former Wynn Resorts CEO Steve Wynn, thus demonstrating their confidence in the long-term strength of the company.”
The release did not identify the buyers. It added that the purchase price of the shares held by Mr Wynn was also US$175 a share.
“The two sales, combined with previous sales by Mr Wynn, effectively eliminate his ownership in Wynn Resorts,” the firm said.
It had been announced on Wednesday by Wynn Resorts that Mr Wynn intended to sell some or all of his shares in the company. At the time of the announcement, he was the largest shareholder in Wynn Resorts, with 12.13 million shares.
Shortly after the announcement, Mr Wynn lowered his stake in the casino operator to about 7.8 percent from 11.78 percent, a regulatory filing showed on Thursday. That made him the third-biggest shareholder in the company, behind his former wife Elaine Wynn and The Vanguard Group Inc, according to Thomson Reuters data.
Wynn Resorts earlier this month announced it had agreed to pay a total of US$2.4 billion to settle a 2012 stock redemption dispute with Aruze USA and the latter’s parent company, Universal Entertainment Corp.
“The resolution of that litigation, combined with the new agreement with Galaxy Entertainment and the liquidation of Steve Wynn’s shares in the company positions Wynn Resorts for even greater stability, strategic focus and future growth,” Wynn Resorts stated in its Thursday release.
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"The stronger mass growth [in Macau in the second quarter] should be viewed positively vis- à-vis [the] government’s stated priority”
Japanese brokerage Nomura