Blackstone Group has put forward a bid of $6.2bn to buy Australian casino operator Crown Resorts with the deal representing a huge markdown on the company’s value last year.
Blackstone already has a shareholding of 9.99 per cent in Crown which it acquired from Melco Resorts & Entertainment Limited for $8.15 per share in April 2020.
Crown Resorts confirmed it had received an ‘unsolicited, non-binding and indicative proposal from a company on behalf of funds managed and advised by The Blackstone Group Inc. and its affiliates, to acquire all of the shares in Crown by way of a scheme of arrangement at an indicative price of A$11.85 cash per share.’
It said: “The Crown Board has not yet formed a view on the merits of the proposal. It will now commence a process to assess the proposal, having regard to the value and terms of the Proposal and other considerations. It will also engage with relevant stakeholders including regulatory authorities. Crown shareholders do not need to take any action in relation to the Proposal at this stage. There is no certainty that the proposal will result in a transaction.”
Crown has appointed UBS as financial adviser and Allens as legal adviser in relation to the proposal.
The indicative price of $11.85 cash per share represents a premium of 19 per cent to the volume-weighted average price of Crown shares since the release of its 1H FY21 results. The proposal is subject to a number of conditions, including due diligence; arranging debt finance; a unanimous Crown Board recommendation and a commitment from all Crown Directors to vote in favour of it.
There will also be a condition that Blackstone receives regulatory confirmation that a Blackstone-owned Crown is considered a suitable person to continue to own and operate the Sydney, Melbourne and Perth licences and other gaming-related approvals as required; and approval from Blackstone investment committees.
Nathan Bell, portfolio manager of Intelligent Investor, which has Crown shares, said of the offer: “Blackstone couldn’t get away with a price like this if the casinos weren’t being affected by COVID and the management issues at the same time. It’s only an opening bid. It’s a messy situation and offering to acquire a casino is a complex affair at the best of times due to all the regulation.”
James Packer, who’s father Kerry founded the business is still the biggest shareholder in Crown with a 36 per cent stake. He would get roughly A$2.9bn from the deal.
Crown’s problems really began in 2016 when 18 members of staff were jailed for promoting gaming in China. In 2019, media reports accused Crown of working with junket operators connected to crime. Since findings of the NSW Independent Liquor and Gaming Authority Inquiry, who ruled Crown as not fit to hold a gaming licence in the state, Crown has confirmed it is undergoing ‘a complete and comprehensive corporate re-set.’ It has lost about half its board including its CEO since the inquiry and is now being investigated in the other Australian states in which it operates.