Tilman Fertitta, known for his mergers and acquisitions, has increased his stake to almost 10% in Wynn Resorts, leading to speculations that he is planning to acquire Wynn. But analysts say the talks are not likely to be true, especially since complexities abound with such an acquisition. 

Casino mogul Tilman Fertitta has increased his stake in Wynn Resorts to 9.9%, sparking speculation about a potential takeover. However, one analyst believes the Golden Nugget owner is likely to remain a passive investor despite his growing interest in the casino giant.

A Wynn takeover?

In a recent report, CBRE analyst John DeCree noted Fertitta's significant stake in Wynn and its implications. Fertitta’s investment grew from an initial 6.1% position two years ago to nearly 10% during the third quarter, as revealed by a recent 13G filing. This disclosure signaled that Fertitta does not intend to act as an activist shareholder. Had the filing been a 13D, it would have indicated an intent to influence company decisions or advocate for changes.

The news of Fertitta’s expanded stake boosted Wynn’s shares by 8.65% last week, with investors factoring in Fertitta’s track record of acquisitions, such as his takeovers of McCormick & Schmick’s and Morton’s Restaurant Group.

“We can appreciate the speculation, particularly given Fertitta’s mergers and acquisitions track record, including the acquisition of Morton’s Restaurant Group and McCormick & Schmick’s, both of which started with 13G filings and culminated in full takeovers,” wrote DeCree.

Takeover assumptions: believable, but not likely 

Fertitta’s increased position in Wynn, coupled with his history of acquisitions, has reignited rumors of a potential takeover. A 10% stake typically grants a significant level of influence, prompting companies to engage with such investors. However, holding a sizable stake does not necessarily indicate intent to acquire. DeCree compared Fertitta’s situation to other notable passive investors, such as Warren Buffett and Berkshire Hathaway, at which Buffet frequently holds large stakes in companies without pursuing takeovers.

Fertitta has already made substantial returns on his original Wynn investment, with the stock up 70% since his position was first disclosed, stated DeCree. He may prefer to maintain a passive stance to preserve those gains while still capitalizing on future upside potential, he added.

DeCree further noted that Fertitta’s move likely reflects an attractive value investment rather than a strategic acquisition, though circumstances could change if an economic downturn or market dislocation creates new opportunities.

Challenges in a Wynn takeover

While Fertitta or other suitors may view Wynn Resorts as an appealing acquisition target, any potential deal would face significant complexities. Wynn’s operations in Macau, where gaming licenses are tightly regulated, and its ongoing casino hotel project in the United Arab Emirates, add layers of intricacy that don’t affect all its competitors.

These factors could make a full-scale acquisition challenging, suggesting that any efforts by Fertitta to influence Wynn might take a strategic instead of an outright acquisitive approach. For instance, speculation recently emerged that Fertitta trusts that Wynn’s management could improve how it communicates the stock’s performance to shareholders. Wynn’s shares have outpaced industry peers over the past year, yet some investors argue the company could expand its well-regarded brand further in the US. 

At the moment, Wynn’s domestic portfolio includes the Wynn and Encore complex on the Las Vegas Strip along with Encore Boston Harbor. The company is also bidding for a New York City gaming permit, which could significantly boost its US presence.

Fertitta’s growing stake in Wynn Resorts has fueled chatter about a potential acquisition, but analysts believe he is more likely to remain a passive investor. His history of strategic investments and the challenges inherent in acquiring Wynn suggest that his increased position may reflect confidence in the company’s long-term value rather than immediate takeover plans.