Wynn Unlikely to See Activist Action, Says Analyst

Wynn Resorts (NASDAQ: WYNN) stock is higher by 10.09% over the past month, a period in which a well-known investor upped his stake in the casino operator, but some analysts don’t believe a takeover offer is on the table.

In a new report to clients, GimmeCredit analyst Kim Noland acknowledged that Tilman Fertitta recently upping has been a catalyst for the shares, but that doesn’t mean he’s going to turn activist and pursue a takeover of the company.

Wynnʼs common stock moved higher upon a recent report that Tilman Fertitta, a well-known gaming executive and investor, has increased his passive holding to 9.9%,” wrote Noland. “We donʼt expect near term shareholder activism or a change in shareholder rewards.”

Since a November 13G filing with the Securities and Exchange Commission (SEC) revealed Fertitta boosted his Wynn stake, there’s been chatter that the Golden Nugget owner could make a play for Wynn. The 13G filing is used by passive investors, but those market participants can later shift to 13D’s to signal activism.

Including the acquisitions of Morton’s Restaurant Group and McCormick Schmick’s, Fertitta has a history of taking passive stakes in companies and then turning activist.

Given that history and the billionaire’s long-running interest in owning a Las Vegas Strip casino hotel, analysts acknowledge it’s possible he’s interested in acquiring Wynn, but . As of yet, the Houston Rockets owner hasn’t indicated he’s pursuing an activist role at Wynn or that he wants to acquire majority control of the company.

There’s been speculation that if Fertitta pushes for change at Wynn, it could be in the form of encouraging the operator to leverage its revered brand for expansion in the US where it currently runs just three gaming venues Wynn and Encore Las Vegas, and Encore Boston Harbor.

As things stand today, the only guaranteed upcoming addition to the operator’s portfolio is Wynn Al Marjan Island (UAE). Fertitta is the second-largest individual shareholder in the gaming company behind only Elaine Wynn.

While a takeover offer may not materialize over the near- to medium-term, there are other catalysts supporting the Wynn credit and equity investment theses, including a sturdy balance sheet, debut reduction efforts, and share repurchases.

Wynnʼs global liquidity remains strong at near $3.5 billion, including cash and equivalents and revolver availability (Wynn extended near term maturity bank credit facilities),” added Noland. “At quarter end debt was $11.79 billion but on October 1,the company repaid the 4.875% senior notes due 2024 in the amount of $600 million and the remaining $600 million of Wynn Las Vegas senior notes due 2025, resulting in significant debt reduction. Wynn continues its shareholder dividend and recently increased its share repurchase authorization to $1 billion.”

Noland has an “outperform” rating on Wynn bonds maturing in 2031 that carry a coupon of 7.125%.