Shares of Wynn Resorts (WYNN) are in the spotlight on Tuesday after the company said it is merging its online betting platform Wynn Interactive with Austerlitz Acquisition Corporation I (AUS) to create an independent public company. Following the news, Citi analyst George Choi upgraded Wynn Resorts to Neutral, calling Interactive's spinoff a "value-enhancing" deal.
WYNN INTERACTIVE SPINOFF: Wynn Resorts and Austerlitz Acquisition Corporation I, a special purpose acquisition company, announced on Monday that they have entered into a definitive agreement under which Austerlitz I will combine with Wynn Interactive, a subsidiary of Wynn Resorts, to create an independent public company. Upon closing of the proposed transaction, the combined company will retain the Wynn Interactive name and relist its shares on the Nasdaq Stock Exchange under the new ticker symbol "WBET." The combined company is expected to have an enterprise value of approximately $3.2B at closing, representing 4.5 times Wynn Interactive's projected 2023 revenue. Upon closing of the transaction, assuming no share redemptions by the public stockholders of Austerlitz I, Wynn Interactive's current shareholders will retain an equity interest in the company of approximately 79%, inclusive of 58% equity interest by Wynn Resorts, Austerlitz I's stockholders will hold approximately 18% and Austerlitz I's sponsor will hold approximately 3%.
After market close on Monday, Wynn Resorts also reported first quarter losses per share of ($2.41) and revenue of $725.8M, with consensus at ($1.98) and $758.02M, respectively. "Our first quarter results reflect continued progress in our business as consumers began to once again travel to their favorite leisure and gaming destinations," said Matt Maddox, CEO of Wynn Resorts. "Wynn Las Vegas showed continued strength in the casino segment, with the property remaining the destination of choice for high quality gaming customers, while forward bookings in the leisure segment improved throughout the quarter. Encore Boston Harbor again delivered record Adjusted Property EBITDA on the back of solid execution across the property. In Macau, we experienced continued gradual improvement in visitation trends driving particular strength in premium mass casino and luxury retail."
'VALUE-ENHANCING' DEAL: Citi analyst George Choi upgraded Wynn Resorts to Neutral from Sell with a price target of $126, up from $112. The analyst told investors in a research note that he views Wynn Interactive's merger with Austerlitz Acquisition as "value-enhancing." With its increasing dedication to the Premium Mass segment, which offers some of the highest quality non-gaming amenities in Macau, Wynn Resorts will improve its earnings quality, Choi contended.
Meanwhile, Morgan Stanley analyst Thomas Allen raised the firm's price target on Wynn Resorts to $145 from $140 and kept an Overweight rating on the shares. The analyst raised his core casino property estimates to reflect stronger than expected trends across all markets reported in the first quarter and based on the fact that second quarter trends "have really taken off." In addition, Wynn is merging its interactive business with a special purpose acquisition company, which will provide it with capital "to compete more effectively," Allen contended. The analyst added that Wynn's SPAC merger increases his confidence in the sports betting and iGaming business, which he now values at $11 per share, up from $4 per share previously.
PRICE ACTION: In morning trading, shares of Wynn Resorts are little changed at $125.79.
