Steve Wynn has agreed to give up control over his ex-wife’s shares of Wynn Resorts Ltd, a few days after announcing his resignation as chairman and chief executive of the casino group amid allegations of sexual misconduct. The decision could potentially end a six-year legal battle between the businessman and his ex-wife, Elaine Wynn.
It had also been announced last week that Mr Wynn resigned as chairman and CEO of Macau-based casino operator Wynn Macau Ltd; the latter is a subsidiary of Wynn Resorts. Mr Wynn has denied the allegations of sexual misconduct.
Wynn Resorts said in a Friday filing that it had been informed by Mr Wynn’s lawyer that a letter was submitted to “the parties in a lawsuit which is pending in the United States District Court for the District of Nevada”. The letter reportedly states that given the recent resignation of Mr Wynn, he concluded that the 2010 stockholders’ agreement between him and his former wife is “invalid and unenforceable as a matter of law”.
The letter further stated: “While Mr Wynn does not agree with Ms Wynn’s bases for claiming the 2010 stockholders’ agreement is now invalid and unenforceable, he does agree that it no longer binds either party.”
Stockholder agreements first signed in 2002 and amended in 2006 and 2010 required Ms Wynn to vote her shares with her ex-husband, despite their 2010 divorce.
But in 2012 – the same year Wynn Resorts forcibly ordered the redemption at a discount of the company shares held by its then biggest single shareholder, Japanese gaming entrepreneur Kazuo Okada – Ms Wynn filed a lawsuit seeking to free her of the obligation to vote her stock with Mr Wynn.
An agreement prevented Mr Wynn, Ms Wynn or Mr Okada from selling their respective shares without the consent of the other two parties. Post the redemption of Mr Okada’s shares, Ms Wynn argued that the stockholders’ agreement was no longer valid. Mr Wynn is involved in another legal battle with Mr Okada regarding the forcible redemption of Mr Okada’s shares in Wynn Resorts.
Wynn Resorts said in Friday’s filing that Mr Wynn had no immediate plans to sell his shares and would only do so in an orderly fashion in any case.
According to previous company filings, Ms Wynn’s stake – at about 9.3 million shares – represents approximately a 9.4-percent interest in Wynn Resorts, while Mr Wynn has about 11.4 million shares in the firm, representing an approximately 11.8-percent interest. Voted together, the 20.7 million shares of the ex-couple form a bigger block than any other single shareholder in the company.
In last week’s letter sent to the parties in the lawsuit between Mr Wynn and his ex-wife, Mr Wynn said he would advise the court of the latest development “so that it may consider the same and streamline its preparation” in advance of this week’s summary judgment hearings.
Terminating the stockholders’ agreement would permit both Mr Wynn and Ms Wynn to freely manage their respective shares, including selling them.
“While it is easy to conclude that freeing up either party to sell their shares (about 20.7 million in total / approximately 20 percent of shares outstanding) creates somewhat of an overhang, we see the action as rather benign at this stage,” said analysts at brokerage Deutsche Bank Securities Ltd in a note on Friday.
They added: “For starters, Ms Wynn has to agree to the proposal, and while likely, we don’t believe it to be a foregone conclusion, as some may consider it to be. We also don’t believe Mr Wynn is a voluntary seller at this stage. Additionally, the gesture by Mr Wynn could create some constructive discussion and potentially alleviate future headlines as the trial gets underway.”
The recent sexual misconduct allegations surrounding Mr Wynn have led some leading rating agencies to revise their outlook on Wynn Resorts. On Thursday, Moody’s Investors Service said it was revising Wynn Resorts’ outlook to negative, while affirming the company’s Ba3 corporate rating.
“Although the claims against Mr Wynn are only allegations, the reputation, financial performance, and licensing status of the Wynn Resorts’ casino assets, which bare Mr Wynn’s name, could be harmed, albeit by perception alone,” said Keith Foley, Moody’s senior vice president, in a statement.
“The outlook revision to negative also considers that Wynn Resorts will lose access to Mr Wynn’s highly-regarded development and operational expertise as he will no longer be part of the company’s management,” added Mr Foley.
Standard & Poor’s Global Ratings also revised its outlook a fortnight ago on Wynn Resorts and its subsidiaries – including its Macau unit – to “negative” from “stable”.
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”We do not believe that reopening the advance notice nomination deadline [for board directors] is appropriate or justified”
Daniel Boone Wayson
Chairman of the Wynn Resorts board of directors