GGRAsia – Crown Resorts receives US$6.2bln bid from Blackstone

Crown Resorts receives US$6.2bln bid from Blackstone

Mar 22, 2021 Newsdesk Latest News, Rest of Asia, Top of the deck

Australian casino operator Crown Resorts Ltd says it received on Sunday “an unsolicited, non-binding and indicative proposal” from private equity management firm The Blackstone Group Inc, to acquire all of the shares in Crown Resorts.

Crown Resorts said the proposal was at “an indicative price of AUD11.85 [US$9.15] cash per share”, according to a filing to the Australian bourse on Monday. Blackstone’s proposal values the deal at more than AUD8.02 billion (US$6.18 billion), based on the Australian firm’s outstanding shares.

Crown Resorts’ shares jumped to AUD11.71 when trading resumed on Monday morning in Australia.

Blackstone is no stranger to investment in the casino industry. The firm’s current portfolio includes a shareholding of 9.99 percent in Crown Resorts. It was acquired from casino developer and operator Melco Resorts and Entertainment Ltd in April 2020.

Blackstone currently owns the property of a few casino hotels in Las Vegas, including the MGM Grand, the Mandalay Bay and the Bellagio.

Crown Resorts – until 2016 a partner in the Macau gaming market alongside the Melco brand – has been facing stringent regulatory scrutiny in Australia. In February, the firm was found unsuitable to operate a new Sydney casino at Barangaroo, in New South Wales. The regulator there suggested a number of recommendations be adopted by the firm in order to be considered fit to be granted a gaming licence.

Crown Resorts’ chief executive Ken Barton and several other directors have since quit, and a new management team has been appointed to run the operations.

Crown Resorts is also facing regulatory scrutiny in the Australian states of Victoria, where it operates Crown Melbourne, and in Western Australian, where it runs Crown Perth (pictured), over the firm’s suitability to hold its casino licences in those states.

Australian businessman James Packer is the biggest shareholder in Crown Resorts, with a stake of about 36 percent.

Lengthy probity process

Crown Resorts said in its Monday filing that the indicative price of AUD11.85 cash per share proposed by Blackstone represented a premium of 19 percent to the volume-weighted average price of Crown Resorts shares since the release last month of the casino operator’s for the first half of fiscal year 2021.

The board of Crown Resorts stated in the filing it had “not yet formed a view on the merits of the proposal”. It stated it would “now commence a process to assess the proposal, having regard to the value and terms of the proposal and other considerations.” The casino operator added it had appointed banking group UBS as financial adviser, and law firm Allens as legal adviser in relation to the proposal.

Brokerage JP Morgan Securities Australia Ltd said in a Monday note that Blackstone’s bid might not be attractive enough to convince Crown Resorts’ shareholders. Based on where Crown Resorts was “trading prior to Covid-19 (and with the upside potential of Barangaroo) our initial view is AUD11.85 per share would be insufficient for approval from shareholders and the board,” suggested analysts Don Carducci and Abhinay Jeggannagari.

“The Blackstone probity process is likely to take in excess of the remaining calendar year … and is unlikely to be expedited, even if the attitude of the applicant is overly compliant,” stated the JP Morgan team.

The analysts added: “The Australian regulators will certainly look at Blackstone’s assets in the U.S. and evaluate exposure to junket operators due to recent events.”

Crown Resorts said the proposal by Blackstone was subject to a number of conditions, including arranging debt finance, and “a unanimous Crown board recommendation and a commitment from all Crown directors to vote in favour of the proposal (in the absence of a superior proposal and subject to an independent expert concluding that the proposed transaction is in the best interest of Crown shareholders).”

Conditions for the transaction to move ahead also include that “Blackstone receive 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.”