The Crown Resorts Ltd (ASX: CWN) share price has exploded 20% higher after the company confirmed it is in takeover talks.
Crown Resorts is one of Australia’s largest gaming and entertainment groups. It operates two integrated resorts in Melbourne and Perth. Crown also fully owns and operates Crown Aspinalls in London, one of the high-end licensed casinos in the West End entertainment district. It is currently developing Crown Sydney at Barangaroo.
The Crown Resorts Takeover Offer
Earlier, the Australian Financial Review broke the story that casino giant Wynn Resorts has approached Crown Resorts with a takeover offer.
Wynn Resorts has locations in Las Vegas, Macau, Cotai and Boston Harbour.
The ‘confidential discussions’ are ongoing between Crown and Wynn about a potential takeover via a scheme of arrangement of a combination of cash and Wynn shares, which is listed on the NASDAQ.
The proposal under consideration is 50% cash and 50% Wynn shares, with an implied value of $14.75 per share at a fixed exchange ratio. However, the terms of the consideration are yet to be agreed.
Crown said that there are a number of conditions including due diligence, Wynn obtaining all the necessary regulatory approvals and a recommendation from the Crown Board. For now the offer is preliminray, ‘confidential’, non-binding and indicative.
There is no certainty the discussions will result in a transaction, Goldman Sachs and UBS are acting is financial advisers whilst Ashurst is the legal adviser.
Would This Be A Good Takeover Price?
The takeover price of $14.75 would be a 26% premium to the closing price yesterday, which is why it’s up 20% at the moment in reaction to the news.
Some Crown shareholders might say the bid is a bit opportunistic (which Wynn has every right to be) with the share price down 20% since the August 2018 reporting season.
At the moment there is a lot of risk factored into the share price with Crown Sydney currently being constructed. But once it’s completed it could materially boost the Crown earnings and share price.
The Wynn Resorts offer prices Crown at nearly 25 times the 2020 financial year’s estimated earnings, according to CommSec.
It will all depend on whether James Packer wants to approve the takeover or not.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).