Following an apparent leak regarding the details of preliminary negotiations, Wynn Resorts has decided to completely halt its planned US$10 billion acquisition of Australian gambling firm Crown Resorts. The company blamed the "premature" disclosure of the deal as the main reason for its decision to back out.
The announcement was made just hours after Wynn had confirmed to the US Securities and Exchange Commission that it was already in talks with the Melbourne-based gambling company.
Wynn mentioned in its terse statement that it will be terminating all discussions with Crown Resorts moving forward. In a separate statement, Crown revealed that the discussion it had been having with Wynn was still at a preliminary stage and no concrete offer had been put on the table.
Reports of the takeover were initially posted on an Australian column, which immediately caused a stir in the Australian stock market. Share prices for Crown Resorts jumped by as much as 20 percent and were trading at around US$14.05 per share following the news.
Crown Resorts is currently only a quarter of the Wynn's size in terms of value, but it currently does hold a large market share in one of the most lucrative countries for gambling operators.
Australia's gambling spends per person currently stands at around US$1,000, which is significantly greater than the US$470 in the United States. Australia's gambling market also has a large Chinese customer base, which should be particularly attractive to Wynn.
Wynn Resorts has traditionally been a builder of gambling properties, but its decision to acquire Crown will make a lot of business sense. According to analysts, the acquisition of Crown will greatly improve Wynn's geographic diversity.
This will also allow it to tap further into the high-end Asian gambling market. Wynn currently earns around 75 percent of its revenue from Macau. Meanwhile, its earnings at home mostly come from the revenue it generates from Asian players.
Another reason good reason for Wynn to proceed with the acquisition is the fact that Crown is currently in the middle of a large development run, which includes its planned 2021 launch of its flagship property in Barangaroo, Syndey, estimated to be worth more than US$2.2 billion.
With the deal currently on hold, market analysts have begun to assess the possible outcome of a merger between both companies. Morgan Stanley surmised that taking over Crown would make a lot of strategic sense for Wynn, which may mean that its decision to scrap the deal could only be temporary.
