Nomura Instinet runs through the scenario where a deal by Wynn Resorts (WYNN -1.8%) to sell its Encore Boston Harbor casino is pulled off with MGM Resorts (MGM -1.8%) and the help of MGM Growth Properties (MGP -0.5%).
MGP: "If MGP buys the assets for 13.5x rent at 1.8x coverage, assuming $300mn of post ramp EBITDAR, and issues stock at its current multiple of ~15x or finances the deal with debt, the transaction would be accretive and positive for MGP shareholders."
Wynn: "If WYNN sells the casino at anywhere around $3bn, it records a $200-400mn (+/-) pretax profit, and strengthens its balance sheet, that would be positive for its shareholders."
MGM: "For MGM, it acquires a unique stream of urban EBITDA projected at $300mn annually (once ramped +/-) with no competitive threat for under 8x EBITDAR, and it’s FCF accretive to its shareholders by $0.10/sh."
No deal can make it to the finish line unless the Everett City Council and state regulators approve, notes the Nomura analyst team of Harry Curtis, Daniel Adam and Brian Dobson.
Now read: Las Vegas Sands Looks Undervalued »
Subscribe for full text news in your inbox