Las Vegas Sands (LVS) may be looking to acquire Wynn Resorts, an analysis by a boutique investment bank and advisory firm for the gaming industry suggests. Union Gaming LLC, in a note published Thursday overnight, cited Okada Manila in the Philippines, Australia-based Crown Resorts, and Wynn Resorts, all three as potential acquisition targets for the Nevada-based casino and hospitality operator.
“…I’m going to add on to our strategic thinking, strategic priorities that we can acquire because most of the other companies don’t have the balance sheet that we do, and they don’t have the potential market that we do…I’m now taking on the strategy of both acquiring and building and developing.”Sheldon Adelson, Founder and Chairman, Las Vegas Sands
Adelson Looking to Buy
Reading between the lines of LVS Chairman’s Q1 2020 conference call, Union’s analysts come up with three potential acquisition targets as the most suitable regarding LVS’s preference for being as close as possible to the Asian client, with special emphasis on the Chinese consumer.
Okada Manila looks like the best bet for LVS to enter its third Asian market, after its presence in Macau and Singapore is now firmly established, with the integrated resort targeting the high-end clients in a market that resembles the early years of Macau. Analysts estimate the property, after the completion of its final hotel tower, would generate around $300 million of EBITDA, enough to attract interest from Las Vegas Sands.
The second mentioned target, Crown Resorts, has high quality assets in a first world market, plenty of owned real estates and some additional development prospects, as well as a solid Chinese VIP junket business, traits that would make it attractive to the ambitions of the 28th in the Forbes 2020 Billionaires list Sheldon Adelson.
Wynn Resorts’ acquisition, though, would make the most sense from strategic point of view, argue Union’s analysts, as it would add $1.6 billion of EBITDA, increase LVS’s hotel capacity in Macau with another 2,700 rooms and would create cost synergies both in Macau and in Las Vegas.
Wynn Resorts Firm in the Storm
Last week, Wynn Resorts’ President and CFO Craig Billings, announced during an earnings conference call the group’s Asian subsidiary, Wynn Macau, was burning a hole in the cash reserves, to the extent of $2-2.5 million per day, due to the slow restart of the industry in the Special Administrative Region of China, still under the grip of travel restrictions. Mr Billings pointed out group’s management optimism remained that business would pick up as soon as travel restrictions were lifted.
Wynn Resorts posted its Q1 2020 financial report, reporting a 42% drop in revenue, outlining the significant impact on its operations from the ongoing casino closures due to the health crisis and the measures undertaken to contain the spread of the virus.
During the same conference call Wynn Resorts CEO Matt Maddox stated that the group was not looking into any M&A activities, pointing out the company was looking to utilize its expertise in the development and running of “industry-leading” assets.
Mr Maddox admitted though, that during these times some really interesting assets could come up and all the strongly positioned in the industry would be looking to take advantage of the strength in their balance sheets. And even if Wynn’s stock may not be attractive for investor stock portfolios, it may be a great acquisition for a competitor like Las Vegas Sands.