Why would Wynn consider selling its Everett casino when it’s so close to opening?
After eight years of regulatory hurdles, record fines, and damaging fallout from a sexual misconduct scandal, Wynn Resorts has finally reached the 1-yard line, only five weeks away from opening its $2.6 billion casino resort along the banks of the Mystic River in Everett.
So why on Earth would they punt now?
The high-stakes mystery hovers over ongoing discussions between Wynn Resorts and MGM Resorts about a potential sale of Encore Boston Harbor, which is scheduled to open June 23 with 671 hotel rooms, 15 bars and restaurants, and a massive gambling hall. On Friday, the companies acknowledged in a joint statement to the Globe that they are in “very preliminary” discussions about a sale.
The stunning news has sent waves of concern through political circles, as flummoxed policy makers try to make sense of Wynn’s motivations and what a blockbuster sale might mean.
“I have no clue, absolutely no clue,” said former state senator Stanley C. Rosenberg, a key author of the state’s gaming law, on why Wynn Resorts would consider selling so soon after state regulators allowed it to retain its license. “This is not going to be a slam-dunk by any means. This isn’t a Monopoly game.”
Industry experts were also mystified.
“Makes no sense at all,” said Alan R. Woinski, a New Jersey casino consultant and president of Gaming USA. “I don’t know why they would even entertain it.”
A sale would have been easier to understand a few months ago, he said, before Massachusetts regulators completed their investigation into Wynn Resorts’ handling of sexual misconduct allegations against its founder, Steve Wynn.
But after 15 months of investigating and deliberation, the state Gaming Commission announced April 30 that Wynn Resorts was fit to operate a casino in Massachusetts, lifting a cloud that had hung over the project. The commission fined the company $35 million after investigators concluded that former executives helped cover up allegations against Steve Wynn.
Public companies have a duty to shareholders to consider business opportunities, and some industry specialists said they could see why Wynn Resorts would be open to realistic offers.
“They are not an operator of regional casinos,” said Frank Fantini, publisher of Fantini’s Gaming Report. “They’re in Las Vegas, they’re in Macau — they are really an Asian gaming company now” with eyes on a lucrative expansion into Japan. “I don’t know if they really need Boston.”
Privately, Wynn officials have been baffled and increasingly frustrated by their treatment in Massachusetts. They spent billions to clean up a heavily polluted property and build what they describe as the largest single-phased private development in state history, poised to become one of the state’s largest employers. They don’t receive any enticing state tax breaks, and in fact will pay 25 percent of all gambling revenue in state taxes.
Yet few elected officials ever offer public support for the company, and the Gaming Commission sharply criticized Wynn chief executive Matt Maddox in its recent decision, even requiring him to get executive coaching.
“They have not had a very happy experience in Massachusetts on the regulatory front,” Fantini said.
Representatives for MGM and for Wynn Resorts declined to comment Monday.
From MGM’s point of view, a deal with Wynn would give it entry into the state’s most lucrative casino market, in an impressive building created with a keen eye for detail and luxury. Buying Encore would allow MGM to continue relationships it has built in Massachusetts over years. And a Boston-area hotel would fit with the company’s current portfolio of casinos in or near major gateway cities, including Detroit and Washington, D.C.
But a sale faces any number of roadblocks. A primary complication for MGM is what to do about MGM Springfield, its $960 million casino resort that opened last August. By law, no company can hold two Massachusetts casino licenses.
“They can try to divest Springfield, but right now Springfield is not a roaring success,” Fantini said. Gambling revenue has been far lower than expected, though company officials say it will improve with time and marketing.
The second complication would be the commitments both companies made in writing to their host communities.
“It’s not going to happen,” Everett Mayor Carlo DeMaria said on Monday of a potential sale. “I don’t think I would have done a host agreement with anyone else. And now they’re going to sell it? No.”
DeMaria’s spokesman, George Regan, stated that city residents voted to approve a deal with Wynn Resorts and Wynn Resorts alone.
“The mayor is not going to be pushed around,” Regan said. “He has veto power and he will exercise it.”
Governor Charlie Baker on Monday expressed concern about the prospect that the talks might disrupt the Springfield casino’s operations or delay the opening of the Encore.
“Everybody’s expecting and anticipating that they’re going to open this thing in June and those 5,800 people are going to go to work,” Baker told reporters. “MGM has an operation that’s going on in Springfield. It employs thousands of people and it’s a big part . . . of the city, and I think our expectation is that’s going to continue to be the case.”
Any major deviation “would obviously be a big cause of concern for us,” he added.
Baker also referenced the significant hurdles any Wynn-MGM deal would face, with municipal officials and the Gaming Commission holding most of the cards.
“I would expect them to fully utilize the leverage and the authority that they have to ensure that the concerns that people who work at both those places, as well as those two communities, are paramount,” Baker said.
State Senator James T. Welch, whose district includes the Springfield casino, expressed concern over the prospect of MGM’s departure.
“Would the company that would be coming in be of equal reputation?” he asked. Would it have the ability to deliver on what “MGM sold to our community, which was: ‘We can bring in the top-level entertainment, we’re going to run a first-class resort facility.’ Is that still all going to be true?”
State House majority leader Ronald Mariano, who has witnessed decades of debate over casino gaming, lamented the latest twist.
“It’s taken us an awful lot of time to get to a position of uncertainty,” the Quincy Democrat said with a rueful chuckle.
The Wynn-MGM talks could complicate the Legislature’s efforts to legalize gambling on sports, which is already legal in Rhode Island and several other states, he said.
“We’re trying to move ahead on sports betting and keep the casinos competitive,” he said. “This uncertainty doesn’t make it any easier.”
Speaker Robert A. DeLeo, another key author of the state’s casino law, called news of the talks “somewhat of a surprise in terms of timing” but said a company wanting to transfer its gaming license is something policy makers planned for. He pointed to a provision in state law that allows the Gaming Commission to reject a proposed license transfer it finds “disadvantageous to the interests of the commonwealth.”