After Las Vegas Sands CEO Sheldon Adelson confirmed last month that his company was interested in mergers and acquisitions, an analyst at boutique investment bank Union Gaming has listed three casino operators as likely potential targets based on what the Las Vegas casino giant said it would be looking for.
Union Gaming analyst John DeCree said in a note published last week that Wynn Resorts, Okada Manila, and Crown Resorts are the casino operators that could at some point become an acquisition target for Las Vegas Sands.
According to DeCree, Wynn is the most likely candidate of the above three, as the acquisition of its fellow Las Vegas casino operator would make the most strategic sense for Las Vegas Sands.
During the company’s first-quarter earnings call, Mr. Adelson said that they are “interested in M&A” and that the could acquire one or more operations as long as the price is right.
The casino industry veteran elaborated that his company has “the best balance sheet in the industry” and that its market cap is “equal to the combined market capital of all other competitors in the US combined.” Las Vegas Sands’ market cap currently stands at more than $37 billion.
Mr. Adelson said last month that while he does not plan to give up on developing integrated resorts, he wants to “add on to our strategic thinking” and that he is now “taking on the strategy of both acquiring and building and developing.”
Why Wynn Acquisition Makes Most Sense?
According to DeCree, the acquisition of Wynn would make the most sense for Las Vegas Sands, because it would add $1.6 billion in EBITDA as well as cost synergies, and would give the company an additional 2,700 hotel rooms in Macau. Las Vegas Sands will also significantly increase its exposure to Macau’s higher-end premium mass and VIP markets.
Las Vegas Sands is already the mass market leader in Macau, while Wynn caters predominantly to the VIP segment.
However, according to Union Gaming, the government of the only Chinese territory where casino gambling is permitted is not likely to authorize a deal that would effectively grow Sands China’s market share from 24% at present to nearly 40% post-merger.
DeCree said that a full acquisition of Wynn’s Macau assets is unlikely, but Las Vegas Sands could buy at least one property, possibly Wynn Macau, while another company, possibly Galaxy, could grab its other property – Wynn Palace.
Okada Manila, Crown Resorts in the Mix
According to DeCree, Okada Manila and Crown Resorts are two other likely acquisition targets for Las Vegas Sands. The potential purchase of Okada Manila would secure Las Vegas Sands’ entry into a third Asian market. The company currently operates properties in Macau and Singapore.
In his note, the analyst explains that while the Philippines’ casino market “doesn’t rival Las Vegas or Macau in terms of regulatory maturity and transparency, we think the region possesses many of the same supply-driven attributes that made Macau an attractive investment opportunity 15 years ago.”
DeCree noted that as construction on the final hotel tower of phase one of the Okada Manila resort is nearly complete, “the property is ready to reach it potential on the other side of the pandemic.”
Union Gaming estimates that Okada Manila could generate $300 million in EBITDA, which “is big enough to move the needle for Las Vegas Sands on its own.”
DeCree said that Australian casino operator Crown Resorts could also be given consideration as it includes a “collection of high quality assets in a first world market with a solid Chinese VIP junket business.”
However, the fact that Crown Resorts is under investigation over alleged ties with Asian organized crime could potentially hamper its acquisition by Las Vegas Sands.
All three companies listed by Union Gaming have solid presence in Asia. And Mr. Adelson said last month that Asia is the best place for his company because “in these virus shutdowns, the agent have been through this for a long time for several times, so they’re used to it.”
The casino executive went on that when it all opens up again, Asian casinos are “just going to come back and continue maybe in a higher pace to make up for the lost time that they’ve experienced.”
Mr. Adelson further told investors that if they find “something good in Asia”, they will certainly move to acquire it.
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