Date of Posting: November 16, 2024, 04:54h.
Last Updated: November 16, 2024, 04:54h.
Tilman Fertitta has increased his stake in Wynn Resorts (NASDAQ: WYNN) to nearly 10% of the outstanding shares, but an analyst suggests that the Golden Nugget CEO is unlikely to pursue an acquisition of his rival.
In a recent report to clients, CBRE’s John DeCree stated that Fertitta is expected to maintain a passive investor role in Wynn despite increasing his stake in the company to 9.9% during the third quarter. This was up from the 6.1% he initially controlled two years ago. News of the increased investment led to an 8.65% rise in Wynn shares on Thursday, with some of the increase attributed to Fertitta’s history of acquisitions.
We can appreciate the speculation, especially considering Fertitta’s track record in mergers and acquisitions. However, the likelihood of a full takeover by Fertitta remains low,” wrote DeCree.
Fertitta’s increased position in Wynn was revealed through a 13G filing. Had it been a 13D filing, it would have indicated his intention to be an activist shareholder, advocating for potential changes at Wynn, including a possible sale.
Fertitta Takeover Scenario Plausible, But…
Given Fertitta’s acquisition history and his stake in Wynn nearing 10%, speculation about a potential takeover is understandable.
A 10% stake is significant enough for a company to take notice, but listening doesn’t always translate to action. Many investors acquire large stakes and remain passive, as seen with Warren Buffett’s Berkshire Hathaway.
Fertitta has already profited from his original Wynn investment, with DeCree noting a 70% increase since the initial position was disclosed. While Fertitta may not want to become an activist shareholder, he likely sees further upside potential in Wynn shares.
“We view his recent move as an attractive value investment that could become strategic in unique scenarios, such as during an economic downturn,” added the CBRE analyst.
Challenges in a Wynn Takeover
While Wynn could be an appealing takeover target, there are complexities to consider, such as maintaining gaming licenses in Macau and the planned UAE casino hotel project.
These factors, unique to Wynn, suggest that if Fertitta aims to make changes at the company, it might be in a more strategic manner rather than through a complete acquisition.
Recent speculation indicates that Fertitta may believe Wynn management is not effectively communicating the company’s performance to shareholders, despite consistently outperforming peers. He may also suggest expanding the brand in the US, where Wynn’s presence is currently limited to the Las Vegas Strip and Boston Harbor, with plans for a New York City gaming permit.