Tilman Fertitta increased his stake in Wynn Resorts to nearly 10% of the outstanding shares, but one analyst believes the Golden Nugget CEO is unlikely to pursue an acquisition of his rival.
In a new report to clients, CBRE analyst John DeCree noted Fertitta is likely to remain a passive investor in Wynn despite increasing his position in the casino giant to 9.9% during the third quarter, up from the 6.1% he controlled after his initial investment two years ago. This news sent Wynn shares soaring by 8.65% on Thursday, partially due to Fertitta’s history of acquisitions. DeCree acknowledged the speculation, highlighting Fertitta’s track record with similar deals, including his acquisitions of Morton’s Restaurant Group and McCormick & Schmick’s, both of which began with 13G filings and culminated in full takeovers.
Fertitta’s increased stake in Wynn was revealed through a 13G filing, which indicates a passive investment. Had it been a 13D filing, it would have signaled Fertitta’s intent to be an activist shareholder, advocating for changes at Wynn, possibly even a sale. Given Fertitta’s acquisition history and his near 10% stake in Wynn, it’s understandable why takeover rumors have emerged.
Holding a 10% stake compels any company to take the investor seriously, though listening to and appeasing investor demands are separate matters. There are numerous instances of investors acquiring significant stakes and remaining passive, with Warren Buffett’s Berkshire Hathaway being a notable example. Fertitta has seen substantial returns on his initial investment in Wynn, with shares up 70% since his position was first revealed. DeCree suggested Fertitta might be content to avoid activism, seeing further upside potential in the shares anyway. The CBRE analyst described Fertitta’s investment as an attractive value play that could become strategic if a unique opportunity, such as an economic downturn, presents further buying opportunities.
There are significant complexities involved in a Wynn takeover. These include maintaining gaming licenses in Macau and the development of a planned casino hotel in the United Arab Emirates. Such factors make Wynn distinct from its competitors and indicate that if Fertitta were to push for change, it might be in a more strategic manner rather than through an outright acquisition.
Recently, there has been speculation that Fertitta believes Wynn’s management has not effectively communicated the stock’s strong performance to shareholders. Despite the stock outperforming peers for over a year, he may think the company should expand its renowned brand in the US. Currently, Wynn’s US presence includes the Wynn/Encore complex on the Las Vegas Strip and Encore Boston Harbor, with the company also bidding for a New York City gaming permit.
