Crown Resorts needs a second suitor to take a punt
A suitor like Blackstone may end up taking over Crown Resorts or just replacing James Packer as the major shareholder. A higher offer price will require at least a second bidder.
Terry McCrann
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First Crown and then Tabcorp: the two dies have very definitely been cast. We will emerge from 2021 with new owners of both our biggest casino group and our biggest punting group.
The range of likely outcomes for Crown are a full takeover by ‘someone’, including the pacemaker – the world’s biggest opportunistic investment group Blackstone – and Blackstone just replacing James Packer as the major and semi-controlling shareholder.
The likely outcomes for Tabcorp are rather different. They also include a full takeover by ‘someone’; the sale of the wagering, the punting, half of the business; and thirdly, the new owners of that wagering side of the business being the old owners.
That’s to say, that half of the business gets sheared off into a new listed vehicle, either via a straight demerger of the wagering – the tab and bookmaking and maybe the pokies, all the original Tabcorp - on a pro-rata basis for existing Tabcorp holders.
Or that’s done around a capital-raising IPO which brings in new shareholders as well plus their cash.
We see the intersection of just too many forces in and around both these two companies and the activity spaces – and growth opportunities, but also growth threats - they occupy, to see the two of them, and especially Crown and Packer, to just wander through 2021 and for nothing to happen.
At the broad level: global ‘free money’; its twin, trillions of dollars swirling around the world looking for assets to buy; dynamic – and I mean wealth-crunching but mostly multi-billion-dollar wealth-creating dynamic – changes in and around media, with interfaces into sport and gambling; the immediate impact of the 2020 lockdowns on wagering and especially gaming franchises; and the huge opportunistic gap opened up in all this for those prepared to punt on the future.
At the specific level, with Crown: there’s a very distressed controlling seller in Packer meeting a cool financial player holding if not all of the aces at least three of them.
Blackstone can happily sell at a big profit – if a Las Vegas-based Wynn or similar was prepared to pay even just close to the $14.75 a share Wynn had been prepared to pay for Crown (just) pre-virus.
Blackstone could happily end up with any higher percentage, whether 20 per cent or 45 percent – picking up the Packer stake – or 100 per cent, starting as it did having paid just $8.15 for the first 10 per cent.
It bought that, of course, from another distressed seller, Packer’s ‘brother’ and former partner in ‘Melco-Crownising’ the world, Hong Kong’s Lawrence Ho.
Packer was a distressed seller in the old-fashioned meaning of the word – (very) unhappy. He’s under no financial pressure to sell.
Crown initially in itself and then as the foundation for a global empire was his life-ambition from around 1998 when he had well and truly forsworn a conventional – father, grandfather and great-grandfather - Packer media future.
He’s long recognised that if he can longer go forward, it made sense to quit, especially given his health issues, and he’s been trying at different degrees and different levels of urgency for close to a decade now.
Brother Ho in contrast was more of a distressed seller in the modern, financial meaning of the word. He had to get out and quick when he was left holding the quarter-part of the Packer stake that he had bought unconditionally, as all of his bankers, the regulators and the virus descended a year ago.
In significant negotiating leverage contrast, it’s not that critical for Blackstone to upgrade its 10 per cent to a bigger stake. Nice but not determinative.
Like every auction the – bigger – price turns on the seller getting at least a second bidder into the plush Mahogany room
Originally published as Crown Resorts needs a second suitor to take a punt
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