The Crown Resorts Ltd (ASX: CWN) share price has been the best performer on the ASX 200 by some distance on Tuesday after the casino and resorts operator confirmed that it has received a takeover approach.
At the time of writing the Crown Resorts share price is up a whopping 20% to $14.08.
What offer has been made?
This morning management revealed that U.S. giant Wynn Resorts has approached the company with a preliminary, confidential, non-binding and indicative proposal that values Crown Resorts at A$14.75 per share. This is a 25.5% premium to the last close price.
According to the release, Wynn is interested in acquiring Crown Resorts via scheme of arrangement for a combination of cash and shares.
At present the proposal contemplates an acquisition consideration of 50% cash and 50% shares. The exchange ratio will be fixed, using a volume weighted average price for Wynn shares, immediately prior to the announcement of an agreed transaction.
At the date of the proposal, the volume weighted average price of Wynn shares implied an exchange ratio of 0.042 Wynn shares per Crown share.
The proposal is of course subject to a number of conditions including due diligence, Wynn obtaining all necessary regulatory approvals, and a recommendation by the Crown Board.
At this stage the Crown board has not yet considered the most recent proposal from Wynn and advised that talks are at a preliminary stage and no agreement has been reached in relation to the structure, value or terms of a transaction.
Although the company warned that there is no certainty that these discussions will result in a transaction, this hasn't stopped some investors from snapping up shares today in anticipation of a deal being done.
What now?
Given that Crown Resorts' shares were trading as high as $14.59 in August but have come under pressure due to tough trading conditions which are likely to be only temporary, I feel this approach is extremely opportunistic.
Furthermore, I don't believe it takes into account the strong growth prospects the company has, especially given the opening of its mega resort in Barangaroo in 2021.
Overall, I'm hopeful the board rejects the approach and the company remains trading on the ASX along with industry peers Star Entertainment Group Ltd (ASX: SGR) and SKYCITY Entertainment Group Limited (ASX: SKC).
