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Tourists walk inside the Wynn Macau hotel in this 2009 photo.

TYRONE SIU/TYRONE SIU/REUTERS

From the FT's Lex blog





This isn't baccarat. It's mud-wrestling. Steve Wynn, chairman of Wynn Resorts , and Kazuo Okada, boss of Universal Entertainment, were once friends. They have made piles of money together opening casinos in Las Vegas and Macao. Mr. Okada owns (or perhaps owned) a fifth of Wynn Resorts shares.



But because of a disagreement over Mr. Okada's plans to build a gambling resort in the Philippines, thereby becoming a regional competitor, accusations of misconduct are flying back and forth. The Wynn Resorts board has voted to redeem Mr. Okada's stake at 30 per cent below the current share price, over a 10-year period.

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If Mr. Okada can be forced to accept these terms, Wynn Resorts shareholders will be delighted. They become the beneficiaries of a very cheap share buy-back. But there will be a long legal wrangle, or a pricier settlement, before the last mud is slung. Wynn's management has, at least, successfully set the terms of the dispute. The fight is, for now, about whether Mr. Okada must accept a discount, not whether he can demand a premium. Well played.



But should the conflict make smaller investors in Wynn Resorts nervous? If the prospect of bare knuckled business practices makes any of them jumpy, it is curious that they put their money to work in the casino industry. And if they are inclined to think about risks, they should think about business fundamentals first.



Wynn is a very well-run company that has outperformed rivals Las Vegas Sands and MGM by 80 per cent and 120 per cent respectively over five years. But it is a concentrated play on China, which was the source of almost four-fifths of profit in the last quarter. That dependence will rise as it has another mega-hotel planned in Macao. A Chinese slowdown will turn the fuss over Mr. Okada into a distant - even pleasant - memory.

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