Fertitta Unlikely to Pursue Wynn Takeover, Says Analyst

Posted on: November 16, 2024, 04:54h. 

Last updated on: November 18, 2024, 09:17h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Tilman Fertitta increased his stake in Wynn Resorts (NASDAQ: WYNN) to nearly 10% of the shares outstanding, but one analyst believes the Golden Nugget chief executive officer is unlikely to purse an acquisition of his rival.

Fertitta Wynn
Billionaire businessman Tilman Fertitta. He’s unlikely to pursue an outright acquisition of Wynn Resorts. (Image: Bloomberg)

In a new report to clients, CBRE John DeCree said Fertitta is likely to remain a passive investor in Wynn despite increasing his position in the casino giant to 9.9% during the third quarter, up from the 6.1% he controlled following his initial investment in the gaming company two years ago. News of that boosted investment sent Wynn shares higher by 8.65% on Thursday with some of that jump attributable to Fertitta’s acquisitive history.

We can appreciate the speculation, particularly given Fertitta’s mergers and acquisitions track record, including the acquisition of Morton’s Restaurant Group and McCormick & Schmick’s, both of which started with 13G filings and culminated in full takeovers,” wrote DeCree.

It was a 13G filing that revealed Fertitta’s increased position in Wynn. Had it been a 13D, that would have signaled he planned to be an activist shareholder, pushing for some form of change at Wynn, including a potential sale.

Fertitta Takeover Speculation Plausible, But…

Combining Fertitta’s history of acquisitions with his Wynn investment now close to 10%, it’s easy to understand why the takeover talk restarted.

Ten percent is a level at which any company would need to listen to the investor holding that position. However, listening and appeasement are often two different things. Plus, there are myriad examples of investors acquiring sizable stakes in corporations and remaining passive. Warren Buffett’s Berkshire Hathaway is one of the prime examples of that.

For his part, Fertitta has made a decent amount of money on his original Wynn stake. DeCree said the stoke is up 70% since that position was revealed. It’s possible the Houston Rockets owner doesn’t want to mess with a good thing by turning activist, but he does see more upside potential in the shares.

“We view his recent move similarly, as an attractive value investment that could become strategic if a unique situation arises, such as an unfavorable economic cycle that results in further dislocation in the shares,” added the CBRE analyst.

Complexities Abound with Wynn Takeover

While Wynn could be an attractive takeover target for Fertitta or other suitors, there are complexities that need to be considered. Those include maintaining gaming licenses in Macau and the planned casino hotel project in the United Arab Emirates (UAE).

Those are moving parts not germane to some Wynn competitors and could signal that if Fertitta wants to push for change at the Encore operator, it could be in more strategic fashion rather than an outright acquisition.

Last week, speculation surfaced that Fertitta believes Wynn management isn’t doing a good job of conveying the stock’s performance — it’s topped peers for over a year — to shareholders and that the operator should considering expanding its venerable brand in the US. Currently , the operator’s US exposure consists of the Wynn/Encore complex on the Las Vegas Strip and Encore Boston Harbor, though the company is bidding for a New York City gaming permit.