Here’s Why MGM Buying Wynn’s Boston Casino Makes Sense

It’s been difficult to keep up with all of the news and rumors circling around Wynn Resorts. One piece of news that’s hard to ignore though is the potential sale of the Wynn Boston Harbor casino project to rival MGM Resorts.

Multiple outlets have reported the story, but by all accounts, a deal is in the very preliminary stages.

If talks progress, there are a lot of wrinkles to iron out beyond the sale price:

• Massachusetts law forbids companies from holding multiple MA casino licenses.
• Both companies are bound by host community agreements. Wynn’s is with Everett, while Springfield has a deal with MGM. These agreements allow the cities to veto any sale.
• The host community agreements include guarantees of sizable investments in the city that neither community is likely to reduce in order to help facilitate a sale.

Basically, for this to work:

• Both casinos would have to be sold in a short window of time.
• Everett would have to sign off on the sale of the Wynn project to MGM.
• Springfield would need to okay the sale of the MGM casino to whatever company emerges as a buyer.

As such, this would be one of the trickiest sales in gaming history.

There are a long list of other news items in the region that make a deal like this all the more far-fetched:

• MGM’s interest in a Connecticut casino
• A joint tribal casino on the Connecticut side of the Massachusetts-Connecticut border
• Gaming expansions in both states

But maybe it isn’t that far-fetched after all?

The only way this makes sense

The following is pure speculation on my part. However, the only way this shuffling of casinos makes sense is if one, or both, of the Connecticut tribes were the suitor for the MGM Springfield casino.

That would result in a Wynn (ICWUDT) for almost everyone involved.

Good for Wynn

Wynn would benefit in a couple of ways.

First, it would bring the investigation in Massachusetts regarding Wynn’s suitability to a close. More than any other jurisdiction it operates in, Massachusetts has heavily scrutinized the Steve Wynn sexual misconduct allegations.

The fate of the Wynn license is still up in the air. Massachusetts Gaming Commission Chairman Stephen Crosby says the company is proceeding at its own risk while the regulatory group investigates.

“Wynn is making the decision to proceed,” Crosby told local press. “There is an investigation going on, and they will be doing this at their risk. That the decision they made and that’s fine with us.”

As such, by selling before there is a decision on the company’s suitability in Massachusetts, Wynn Resorts should still be able to get top dollar for the Everett casino. If they wait, and there is a negative ruling, they might have to unload the casino at a significant discount.

Good for MGM

MGM switching from its Springfield project to Everett would be a major upgrade in terms of the size and  location of its casino.

The Everett casino is roughly 15 minutes from Boston proper. Plus, at $2.4 billion, the property will be a world-class resort, capable of drawing visitors from around the globe. By comparison, the Springfield casino is in a western Massachusetts city with a population of around 150,000 and no major airport.

As long as MGM can offload its billion-dollar Springfield casino, taking over the Wynn Boston Harbor project would be a major upgrade.

Good for Foxwoods and Mohegan Sun

It’s no secret that Connecticut’s two tribal casinos are going to be hard hit by Massachusetts’ casinos.

So it wasn’t too surprising that both tribes made serious bids for Massachusetts’ casino licenses.

Unfortunately for the tribes, neither bid panned out. Foxwoods proposal for a Milford casino lost in a town referendum, and Mohegan Sun’s proposal at the Suffolk Downs racetrack was beaten out by the Wynn project.

To try to shore up their flank, the two tribes sold the state of Connecticut on a joint satellite casino near the Massachusetts border with Springfield.

I’ve likened the $300 million tribal casino that will sit about 15 minutes away from a $1 billion resort casino to bringing a knife to a gun fight. I think the satellite casino will struggle, but it will also have a negative impact on the MGM Springfield casino.

Whether it’s one of the tribes alone, or both working together, if MGM Springfield comes under its/their control the satellite casino is no longer needed.

Further, the tribe or tribes would get what they wanted all along, a Massachusetts casino.

Good for Massachusetts, and both casino cities

Massachusetts would be able to put the ugly mess of the Wynn scandal behind it, and at the same time put an end to the brewing casino border war with Connecticut.

The city of Everett would also put the Wynn mess in its rearview mirror and receive some much-needed clarity about the future of its casino project.

Springfield would eliminate the proposed satellite casino on its southern border, lessening competition in the region.

Bad for Connecticut?

The only potential loser in this scenario would be Connecticut.

However, the state’s inability to make decisions on what type of gambling expansion they support, despite the tribes imploring the legislature to legalize online gaming and sports betting, as well as the state’s unwillingness to write off the idea of opening up the state to commercial casinos, has likely frustrated the tribes and reduced their confidence in the state.

That said, if the tribes migrate to Massachusetts, it could make Connecticut’s gaming decisions much easier.

The state’s decision on land-based expansion would be made for it, with the  satellite casino permanently shelved and perhaps an agreement built into the sale that would see MGM drop its efforts build a commercial casino in Connecticut.

That would allow Connecticut to focus on sports betting and online expansion like the tribes want.