Wynn Resorts to Merge Digital Gambling Business Into SPAC in a Bet on Its Value – Barron’s

Leisure business has been improving for Wynn in Las Vegas. Daniel Slim/AFP/Getty Images

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Wynn Resorts said it lost less money in the first quarter than in previous periods as leisure business in Las Vegas improved, and it unveiled a plan to merge its online/mobile sports betting and gambling business into a SPAC.

Las Vegasbased Wynn Resorts (ticker: WYNN) lost an adjusted $2.41 a share in the first-quarter, versus a loss of $3.54 in the corresponding quarter a year earlier. The quarters operating revenue totaled $726 million, down 24% from $954 million a year ago.

In a quarter still hampered by operational restrictions, WYNNs domestic operations outperformed Street expectations while Macau came in slightly below, Macquarie analyst Chad Beynon wrote in a research note. Macquarie has a Neutral rating on the stock.

The stock was at $127.86 Tuesday morning, up nearly 2% in early trading. As of Mondays close, the stock had appreciated about 11% this year.

In addition to earnings results, the company said Monday that its sports betting and i-gaming subsidiary, Wynn Interactive, will merge with special-purpose acquisition company Austerlitz Acquisition Corp. (AUS.U). Austerlitz is overseen by Bill Foley, a well-regarded investor who also owns the Vegas Golden Knights, an NHL franchise.

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After the deal closes, the sports betting and i-gaming entity will be called Wynn Interactive and trade under the stock ticker WBET. Under the deals structure, Wynn Resorts will have a 58% equity stake in the new company, but stockholders will get no shares in the new entity.

Wynn CEO Matthew Maddox said that Austerlitz will bring $640 million of capital to the new company. Wynn Interactive has about 300 employees.

Deutsche Bank Research analyst Carlo Santarelli wrote in a note Monday that Wynn has prudently created a tracking stock to value its early stage online business.

Various casino operators have taken different approaches to their digital businesses. Boyd Gaming (BYD), for example, owns a 5% equity stake in FanDuel. Caesars Entertainment (CZR) recently announced it had acquired William Hill (WMH.London), a British sports betting firm. MGM Resorts International has a joint venture with Entain (ENT.London), also a British company.

As for Wynns earnings, Maddox told analysts Monday evening that the company saw sales momentum as the quarter progressed in its three main markets: Macau, Las Vegas and Boston.

Since then, he said, momentum is continuing to accelerate.

In Macau, for example, the company generated $43.9 million of first-quarter earnings before interest, taxes, depreciation and amortization, or Ebitda.

That improvement continued in April and May. During Golden Week, which was the first week of May in Macau, we experienced $3 million of normalized Ebitda per day, Maddox said, adding that it was by far the highest amount of normalized profit the company generated there since the onset of the pandemic last year.

In 2019, the company generated roughly 70% of its sales in Macau.

Wynn has been shifting some of its focus there from the VIP market, which has been challenged during the pandemic, to premium and mass premium customers.

Meanwhile, in Las Vegas volumes began to pick about around March Madness, the national college basketball tournament. That activity has accelerated, Maddox said.

In April, the companys revenue per available room in Las Vegas increased 50% over this years first-quarter results. Retail revenues in April were the second best month on record going back to 2005, Maddox added.

Slot machine revenues were strong as well.

Another promising sign for Wynn is hotel occupancy, which is expected to be in the 90% range on the weekends going forward, Maddox said.

The companys group business, a key driver of midweek sales, is holding on and looking quite strong for the back half of the year, he said.

Group business, conventions and trade shows came to a halt during the pandemic, and it remains to be seen how quickly those customers will return to Las Vegas.

Write to Lawrence C. Strauss at lawrence.strauss@barrons.com

Originally posted here:

Wynn Resorts to Merge Digital Gambling Business Into SPAC in a Bet on Its Value - Barron's