Wynn Interactive Among Most ‘Investor-Aligned’ SPAC Deals

Posted on: August 27, 2021, 07:00h. 

Last updated on: August 27, 2021, 11:52h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Resorts’ (NASDAQ:WYNN) plan to take its Wynn Interactive unit public via a merger with a special purpose acquisition company (SPAC) is a rare example of such a deal that’s aligned with investors’ interests.

That’s according to SPACTrack.net, a research firm tracking blank-check deals and activity. In May, Wynn announced plans to merge its online business with Austerlitz Acquisition Corp. I (NYSE:AUS) in a deal with an estimated post-transaction enterprise value of $3.2 billion. Wynn Interactive, home of the WynnBET brand, will trade on the Nasdaq under the symbol “WBET.”

As the table below indicates, the Wynn Interactive blank-check deal is among a small number looking out for investors.

While SPAC transactions have been popular in the gaming space dating back to late 2019, and several others are currently pending, Wynn Interactive is the only one from the industry on the SPACTrack list.

Wynn Interactive Has Important Backstop Provision

The Wynn Interactive contains a backstop, providing some level of investor protection.

SPACs can enter into arrangements with third-party investors or the SPAC’s sponsors to ‘backstop’ a specified amount of potential redemptions by public stockholders at the same price per share as the redemption price per share,” writes Jake Townsend, a mergers and acquisition lawyer at McDermott Will & Emery.

Bill Foley’s Cannae Holdings (NYSE:CNNE) is backstopping share redemptions in the WynnBET deal.

“As a result, irrespective of share redemptions by the public stockholders of Austerlitz I, approximately $640 million in cash will be available to fund the combined Company’s operations and support new and existing growth initiatives of Wynn Interactive,” according to Wynn Resorts.

When the transaction is completed by the end of this year, assuming Austerlitz investors don’t redeem shares, Wynn Interactive’s current shareholders will own 79 percent of the new company.

Austerlitz shareholders will control 18 percent and the SPAC’s sponsor will own the remaining three percent. Wynn Resorts investors will own 58 percent of the new gaming entity and 72 percent of the voting equity.

Why Backstopping Matters

Following a flurry of blank-check deals in 2020 and in the early stages of 2021, many deSPACed stocks, including some gaming names, are struggling.

Those woes are amplifying concerns that while sponsor and investor interests should be aligned, that’s not often the case.

Currently there are over 100 active lawsuits against sponsors, as claimants seek resolution for a variety of alleged failures, including transparency, conflicts of interest and mismanagement,” notes Russell Investments.

Another potential benefit for Wynn Interactive investors is that Foley is a reputable, experienced SPAC player.

Last year, his Foley Trasimene Acquisition Corp. II revealed plans to merge with Paysafe Group Holdings Ltd., a processor of online payments for online sportsbooks. Paysafe now trades on the New York Stock Exchange under the ticker “PSFE.”

Lower quality, less-experienced SPAC sponsors may have to offer a higher proportion of warrants issued for each unit, or share the sponsor promote with investors to attract capital, notes Russell.