Galaxy Entertainment Buys 5.3 Million Wynn Resorts Shares
Galaxy Entertainment Group (GEG) is buying 5.3 million shares of Wynn Resorts at $175-a-share for a total cost of $927 million. Galaxy Entertainment is a Chinese casino company and one of 6 major casino operators in the Macau gaming market.
Matt Maddox, the CEO of Wynn Resorts, said in a press release, “It is an honor to have such a distinguished company as Galaxy Entertainment as a shareholder which shares many of the same core operating philosophies and values.”
Francis Lui, the Vice Chairman of Galaxy Entertainment Group, said of the deal, “This is a unique opportunity to acquire an investment in a globally recognized entertainment corporation with exceptionally high quality assets and a significant development pipeline.”
Bloomberg News speculated the sale of 13.5 million shares could be foreshadowing of a more profound takeover to come for Wynn Resorts.
Wynn Investors Buy 8 Million Shares
Steve Wynn sold 12.1 million shares of Wynn Resorts this week, divesting himself of any holdings in the casino company he founded in 2002. Wynn Resorts announced that two longtime investors, T Rowe Price and Capital Group, agreed to buy 8 million shares of the company, showing confidence in the long term viability of Wynn Resorts.
The move shows confidence in Wynn by Capital Group and T Rowe Price. Despite two months of disastrous media coverage and ongoing investigations by regulators in Nevada, Massachusetts, and Macau, Wynn Resorts stock is up over 6% in 2018.
Though losing its founder and CEO is a tremendous blow — and the company might eventually consider a name change — the elite properties and underlying prestige of Wynn Resorts is great. The company is estimated to be worth $18 billion.
Wynn Resorts Holdings
The “significant development line” Francis Liu discussed includes the Wynn Boston Harbor in Everett, Massachusetts as well as the Wynn West, a 3000-room hotel on the Las Vegas Strip on the site of the defunct Alon/New Frontier casino development.
Wynn Resorts also entered into plans with the City of Las Vegas to build a $1.6 billion convention center and lagoon area adjacent to its signature casino, the Wynn Las Vegas. Speaking of which, Wynn Resorts already owns the Wynn Las Vegas, Encore Las Vegas, Wynn Macau Resorts, Encore at Wynn Macau, and Wynn Palace on the Cotai Strip in Macaua.
Galaxy Entertainment Holdings
For its part, Galaxy Entertainment Group owns the StarWorld Macau, Waldo Casino, Rio Casino, and President Casino the Macau Peninsula. It also owns the Galaxy Macau and the Broadway Casino on the Cotai Strip. Galaxy owns the CityClub casino brand in Macau, as well.
Recently, Galaxy Entertainment announced it plans to build a casino in the Philippines on Boracay Island. The plan is to build a $500 million casino on 23 hectares of land in Barangay Manoc-Manoc on Boracay Island. Galaxy will partner with a Philippine group names Leisure and Resorts World Corp. and expects to draw $100 million in revenues each year.
The plan is ambitious enough that Boracay is going to be shut down for up to one year as the area is cleaned up for the integrated resort complex. Philippine President Rodrigo Duterte gave the cleanup his personal endorsement, as the president in his own inimitable fashion called the current state of Boracay Island a “cesspool”.
Lui Family Ownership Group
The Lui Family of Hong Kong owns a 50.3% interest in Galaxy Entertainment. The Lui Family Trust and K Wah International jointly own 41.7% of Galaxy, while the fanukt has 8.6% of direct interest in the company.
By way of comparison, Galaxy Entertainment Group collected HK$51 billion in 2015, while Wynn Resorts collected US$4.47 billion in 2016. One US dollar equals about 7.6 Hong Kong dollars, so GEG’s annual revenue would be about $6.7 billion a year in US dollars. Thus, Galaxy Entertainment Group is marginally larger than Wynn Resorts by about 50%, if one considers annual revenues alone.
Steve Wynn’s Fall from Grace
By now, Steve Wynn’s fall from grace is known all over the world. Steve Wynn has been in the Las Vegas casino industry since 1966. The first casino he owned was the Golden Nugget, which he operated throughout the 70s and 80s after collecting the casino in a deal involving its previous owner, Howard Hughes.
Steve Wynn built the Golden Nugget Atlantic City in the 1980s, but left the Boardwalk due to disputes with New Jersey regulators. Refocusing on Las Vegas, Wynn built the Mirage, Treasure Island, Beau Rivage, and Bellagio in the 1990s. In doing so, Steve Wynn ushered in the new corporate era for the Las Vegas Strip, when shows and attractions grew non-gaming revenues to rival and exceed gaming revenues. Steve Wynn represented the transition to mob-owned casinos to family-friendly, corporate-owned integrated resort casinos.
Yet Steve Wynn was taken down by dozens of allegations of misconduct. In the “Me Too” era, executives in many industries have resigned. In the wake of his resignation, many have predicted an eventual buyout and Galaxy Entertainment was one of the potental buyers. One might think GEG’s purchase of 5.3 million shares would augur their intention to take over Wynn, but the sell of 8 million shares to board members indicates this is simply an opportunity for Galaxy to pick up prime stocks at a time that the price is down a bit.