Analysts aren’t entirely sure what to think of recent news that Wynn Resorts might be trying to sell off the Encore Boston Harbor resort. Most agree though that the company just seems sick of the Massachusetts regulatory situation.
The Las Vegas Review-Journal reported on several analysts’ thoughts of the situation. The consensus is that Wynn is considering a sale to MGM Resorts because they are sick of the local regulator, but that the math doesn’t totally add up.
“There’s no regulatory reason they’d have to sell,” said Barry Jonas, an analyst with SunTrust Robinson Humphrey Inc. “There’s this baby-sitter-type mentality with an unclear supervisory situation for a few years, that’s one possible reason why they’re exploring monetizing this.”
All the same, even if he can imagine why they would make the deal, he called the potential deal “head scratching.”
“Most of the investors we’ve spoke with are skeptical a transaction makes sense from a structural perspective,” Jonas remarked. “From a strategic perspective, you can argue MGM has been focused on best-in-class regional properties and Boston would fit in there. For Wynn, you can argue that ultimately their model is more high-end VIP in Las Vegas and Asia.”
The company was able to salvage a bad situation, convincing the Massachusetts Gaming Commission to allow them to keep their license despite the sexual harassment suit against former owner Steve Wynn. They also had to pay a $35 million fine, and agree to fund ongoing oversight of their operation for the next three years.
David Katz, an analyst with the Jefferies Group, also noted that this is “new territory” for the operator.
“I’ve covered Wynn a very long time and they’ve never been a buyer of other properties or a seller of their own,” he noted.
If a deal is made, Jonas speculated the resort could sell for anywhere between $2.6 billion and $3.5 billion, even though the property hasn’t proven to be a winner, or even profitable, yet.
That is a huge if, because the state would also have to approve a deal, something it may not do. To do so, MGM would also have to sell off its existing Springfield property. While Springfield isn’t Boston, there’s a lot more certainty in a property they already have up and running, and who knows what prospective buyers there would be for the casino.
