What are Wynn, MGM up to?

Talks may be Maddox’s way of sending a message

NOBODY SEEMS TO KNOW what to make of last week’s announcement that MGM Resorts and Wynn Resorts are engaged in conversations about the sale of Wynn’s Everett casino and hotel.

With just a few weeks before the $2.6 billion casino is scheduled to open and after years of endless litigation and controversy, Wynn and MGM issued a puzzling statement that made it sound as if such discussions are routine and – whatever is eventually decided – the casino will open as scheduled and all commitments will be honored.

A number of news organizations talked to gambling experts and local politicians and none of them had a clue about Wynn’s intentions, although gambling insiders suggested the corporate focus of MGM and Wynn has changed a bit over the past few years.

MGM is now more focused on best-in-class regional properties, and a Boston-area casino would fit well within its portfolio. Wynn Resorts, meanwhile, derives most of its revenue from high-rollers at casinos in Las Vegas and Asia—the Boston casino is a bit of an outlier in the company’s portfolio.

Still, the hurdles to such a sale seem insurmountable. No company in Massachusetts may hold more than one casino license, so MGM could not just buy the Wynn property – it would also have to sell its own casino in Springfield. State regulators and local officials would have veto power over any casino license transfer, and their approval seems highly unlikely at the moment.

David Katz, an equity analyst with New York-based Jefferies Group, said the situation is very unusual. “I’ve covered Wynn a very long time and they’ve never been a buyer of other properties or a seller of their own,” he told the Las Vegas Review-Journal.

“Makes no sense at all,” Alan R. Woinski, a New Jersey casino consultant and president of Gaming USA, told the Boston Globe. “I don’t know why they would even entertain it.”

House Speaker Robert DeLeo issued a statement noting the regulatory hurdles any license transfer would face. “I plan to closely monitor these negotiations between Wynn Resorts and MGM Resorts and will work to ensure that the interests of the Commonwealth, including the host communities of Everett and Springfield, remain the focus,” he said.

The Boston Herald suggests the casino talks are the fault of the Massachusetts Gaming Commission – without ever explaining why. The news outlet quotes Greg Sullivan of the Pioneer Institute as saying Wynn’s sales discussions are the result of failed regulation.

“The commissioners are not instilling us with a lot of confidence these days,” Sullivan said. “It’s almost like Wynn treats them like minor leaguers.”

Globe columnist Joan Vennochi thinks the sales discussions were initiated by Matt Maddox, the CEO of Wynn Resorts. She thinks Maddox is mad at the way he’s been treated by the Gaming Commission and worried about the Everett casino failing to live up to financial expectations.

Vennochi’s reasoning seems sound. Maddox is mad. The Gaming Commission slapped his company with a $35 million fine and hit Maddox himself with a $500,000 fee. The commission also required Wynn Resorts to hire an executive coach for Maddox and an independent monitor selected by the agency to oversee human resource policies. Perhaps most damaging of all, the commission’s vote on Maddox’s suitability to run the Everett casino was not unanimous.

Maddox, who picked up the pieces after Steve Wynn’s sexual misconduct almost derailed the company, feels he is being scapegoated for his predecessor’s failings. He has indicated he may challenge some of the Gaming Commission’s conditions in court.

Talking with MGM resorts is a way of exploring his limited options (he has talked of a sale before, only to back off) and also a way to send a message to the Gaming Commission – look what you’re endangering here.