Wynn Surges on Speculation Tilman Fertitta Stake Could Lead to Takeover Bid

Posted on: November 1, 2022, 04:05h. 

Last updated on: November 1, 2022, 04:17h.

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

Wynn Resorts (NASDAQ: WYNN) was one of Tuesday’s best-performing gaming equities, surging 6.2% on volume that was more than double the daily average. That’s amid speculation Tilman Fertitta could make a takeover bid for the company.

Fertitta Wynn
Tilman Fertitta in a 2020 interview. Some analysts believe he could be positioning for a takeover of Wynn Resorts. (Image: CNBC)

Shares of the Encore operator soared Monday on reports that Fertitta’s Fertitta Entertainment took a 6.1% stake in the casino giant, making him the second-largest individual shareholder, behind only Elaine Wynn. Fertitta’s interest in Wynn was revealed in a Schedule 13G filing with the Securities and Exchange Commission (SEC), which is the document used by passive investors.

Still, CBRE Equity Research analyst John DeCree believes something more could come of the billionaire’s investment in the company.

Potential buyers of Wynn have long struggled over how to deal with Macau. But with seven bidders for six concessions, there could be a window of opportunity to transact,” wrote DeCree in a note to clients. “Fertitta also previously reached a deal to take Landry’s public via a SPAC, but canceled that trade late last year, meaning a reverse merger could be an option.”

Fertitta attempted to bring his Landry’s restaurant and Golden Nugget casino empire public through a reverse merger with a special purpose acquisition company (SPAC). But that deal collapsed last December.

Fertitta/Wynn Deal Has Plenty of Variables

For now, it appears as though Fertitta is doing now more than taking a large stake in Wynn. It comes at a time when the stock is inexpensive on valuation, and as the company’s three US properties are thriving.

Hence, the filing as a passive investor. He’s also planning a new integrated resort on 6.2 acres at Las Vegas Boulevard and Harmon Avenue he recently purchased. To some, that could be a sign that he’s not intending to move on Wynn outright. On the other hand, Fertitta could resell that land to raise cash for a Wynn takeover.

DeCree said that while there are plenty of moving parts and complexities with Wynn’s board of directors that make a proxy battle unappealing, Fertitta could simply make a traditional takeover bid for Wynn. The casino operator closed today with a market capitalization of $6.95 billion, indicating a takeover proposal would likely need to be north of $9 billion to even get the target to the bargaining table.

DeCree rates Wynn a “buy” with a price target of $100, implying upside of almost 50% from today’s close.

Musk/Twitter Could Be Harbinger

CBRE’s DeCree isn’t the only market observer that believes Fertitta’s investment in Wynn could be a precursor to something more substantial. In a Monday note to clients, Gordon Haskett’s head of event-driven research, Don Bilson, reminded readers that Elon Musk’s adventure with Twitter started with a 13G filing. He now owns the social media company outright.

Bilson also pointed out that Fertitta previously made an offer for Caesars Entertainment (NASDAQ:CZR) when that stock was trading at multiples comparable to where it is today.

Fertitta, who now owns 6.1% of Wynn, has “resources and aspirations” and “a strategic asset that could be used in various types of deals” — all of which could be pointing to “whether there is more going on here than meets the eye. A lot more,” opined Bilson.