Casino giant Galaxy buys stake in rival Wynn Macau

HONG KONG

Macau gaming giant Galaxy Entertainment has announced the surprise purchase of a stake in rival Wynn Macau, as it emerged that embattled founder Steve Wynn had sold his entire remaining stake in the company.

Galaxy paid US$927.5 million for five percent of Wynn Macau, which will boost its position in the only part of China where casino gambling is allowed and where annual revenues dwarf those of Las Vegas.

“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,” said Wynn Resorts CEO Matt Maddox in a joint statement.

The move comes at a critical time for the Macau gaming industry as authorities prepare to review licenses for the city in the midst of a graft crackdown in China by President Xi Jinping, which has hurt revenues in recent years.

“Over the longer run, Galaxy may be a potential acquirer of Wynn Macau, and the initial purchase gives Galaxy a first bite at the company,” said a note by analysts at Sanford C. Bernstein & Co.

The note added Galaxy - which is controlled by Hong Kong tycoon Lui Che-Woo - may not want to buy all of Wynn Resorts but “a Galaxy acquisition of Wynn Macau assets would create the leading Macau gaming company.”

Galaxy owns a number of resorts in the city, including the popular StarWorld and Galaxy Macau.

The Las Vegas-based firm also said founder Wynn had sold his entire stake for more than $2 billion, almost two months after he stepped down as chairman and CEO in the wake of allegations of decades of sexual misconduct.

The company’s license is up for renewal in 2022 and analysts said pressure and scrutiny on the casino’s status, which has been marred by the scandal, may ease with its founder’s departure.

The 76-year-old former business rival turned political ally of President Donald Trump resigned in January from his role as Republican National Committee finance chairman, a post he had assumed after his friend took office last January.

Wynn has denied the allegations and accused his ex-wife Elaine of instigating them as part of a “terrible and nasty lawsuit” seeking a revised divorce settlement.

“The risk of potentially not regaining the Macau gaming concession specifically due to allegations against Steve Wynn are too great not to be immediately dealt with,” David Bonnet, partner at Delta State Holdings, told Bloomberg News.

“With Galaxy now as a major shareholder, it reduces the potential uncomfortable questions that any gaming regulators, specifically Macau regulators, will have in the upcoming licence rebidding.”