Slowing organic growth could unleash a wave of merger and acquisition deals in the land-based casino field, a financial advisor believes
Adam Dawes, a senior investment advisor at financial services firm Shaw and Partners has told CNBC that the global casino industry could see a renewed wave of consolidation, particularly in the Asia-Pacific region. Mr. Dawes believes that many of the major US casino players will seek growth through acquisition as they have few other options to grow their businesses at present.
The analyst pointed to the fact that organic growth is not as strong as before in major gambling hubs like Las Vegas and Macau. Las Vegas recorded a 3.8% drop in gaming revenue in March 2019, compared to the same month a year ago, while Macau’s gaming revenue fell 8.3% year-on-year in April.
Mr. Dawes further elaborated that “Macau was the growth engine” but it has slowed down now and that Las Vegas, “the old world”, is not “all so fiery” as it used to be. With the current landscape, the financial advisor believes that casino companies have two options – a merger or “an aggressive takeover” – to “generate the sales and to generate the growth going forward.”
Australia – the New Expansion Destination
According to Mr. Dawes, US casino operators have “deep pockets” and could be “hunting around” for new casino assets that could boost their growth. He also believes that “Australia’s ripe for that picking” and that the Asia-Pacific is definitely a region companies have set their sights on.
News emerged last month that Las Vegas giant Wynn Resorts was in early talks for the potential acquisition of Australian casino operator Crown Resorts for $7.1 billion. However, Wynn terminated buyout talks abruptly after word about a potential deal leaked.
Mr. Dawes said that despite the deal’s failure, it “might accelerate some of the companies starting to look at different areas.” The financial advisor went on to say that there has recently been a consolidation deal Down Under that “worked very well”, pointing to the A$11-billion mega-merger of Tabcorp and Tatts Group that enabled the combined entity to “compete on a global scale.”
The Caesars Sale Saga
Caesars is one of the likely participants in the anticipated M&A wave. The company’s main stockholder, New York activist investor Carl Icahn, is pushing it to sell itself or at least divest some of its assets.
There have been some candidates to buy the Las Vegas-headquartered gambling powerhouse that operates more than 50 properties on four continents. Most recently, Eldorado Resorts and Tilman Fertitta’s Golden Nugget were granted access to Caesars’ financials. However, this does not mean that the gambling empire would eventually sell itself to any of the two.
It has also emerged that Treasure Island’s owner, Colorado businessman Phil Ruffin, has been eyeing Caesars properties on the Strip. The real estate developer has told the Las Vegas Review-Jorunal in a recent interview that he could pay up to $1 billion in cash and raise even more in debt for a Caesars casino resort, if an attractive opportunity emerges.
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