James Packer is the key to new Crown Resorts play

James Packer has two bidders chasing what he’s got to sell but it remains to be seen whether they will put any real cash and real offers on the table.

The Crown casino in Melbourne. Picture: NCA NewsWire/David Crosling

James Packer has got what any seller needs – (at least) two bidders chasing what he’s got to sell, his 37 per cent stake in Crown.

It remains to be seen whether both or even just one of them ‘stays in the room’ when it matters; when they have to put real cash and real offers on the table.

They are both through-and-through main-chancers, making self-interested opportunistic plays. They are not there to play competing Santas for Crown shareholders, including Packer. They want to make big dollars for themselves, and the bigger the better.

The money-making opportunity is presented by the very special circumstances of Packer and his 37 per cent controlling stake in this time of the virus.

Both have made “unsolicited, non-binding and indicative proposals”. They can walk away at any time if they think “the opportunity” has faded.

Pre-virus Crown was arguably the best bricks and mortar gaming group in the world, and certainly outside Macau.

But remember, the pluses of Macau, adjacent to both the billionaires of China and its huge and growing ‘grunt’ player numbers, were also its negatives – that, like Hong Kong, it’s inside that same China, with its ruthlessness, its lawlessness, its ultimate unpredictability.

Ask Jack Ma, a billionaire who won’t be visiting Macau – or indeed Australia – anytime soon.

James Packer appearing before the NSW Casino inquiry last year.

Now yes, the premium value of Crown was built on the same Chinese demographic – as we know, it was also what got Crown into such, potentially terminal, trouble; and probably tipped the issue for Packer.

But the still-appeal of Crown to an investor/owner turns around a series of interlocking dynamics (which each also have their potential downsides).

That Chinese demographic. The monopoly ‘grunt’ licenses in Victoria and WA. The opportunities for rationalization, integration – like the dreamed mega-merger with Star - and expansion geographically, in product terms and into the online space.

The added opportunity is the uncertainty generated by the virus and the dynamics around Packer: those regulatory threats to his controlling stake and indeed the very licenses themselves and his personal health and commitment issues that have made him a seller since at least 2015.

Both proposals are built entirely on buying the Packer stake: not only do they have to be, it’s also the springboard to guaranteed success.

You get Packer’s 37 per cent in your pocket; the other 63 per cent will either follow or not. Whether it does, is both not important and the opportunity for more creative deal-making.

So both require Packer’s endorsement; both also require the Crown board to ‘do it’ for them.

The Blackstone proposal is relatively plain vanilla conventional.

A price is agreed – Blackstone has started at $11.85. Crown directors put it to a general meeting and endorse it as well. If 75 per cent vote yes, Blackstone gets 100 per cent of Crown.

The Packer 37 per cent would be all-but decisive; as the 75 per cent only has to be of the shares voted.

The Oaktree proposal requires Crown itself to buy Packer’s stake, borrowing the money from Oaktree. The Packer shares would then disappear, the other 63 per cent would become the new 100 per cent of Crown.

This is part of the genius of the proposal. It could turn Blackstone from competitor to supporter, voting its shares in favour of Oaktree, as its 10 per cent stake would grow to a 16 per cent stake in the ‘reduced’ Crown.

Why would Crown (and Blackstone) agree to do it?

Ah, the real genius in the Oaktree proposal is to combine the ‘opportunity” of all of the above with the virtual ‘free money’ of zero interest debt - the $3bn to buy Packer out - combined with the hunger for equity, boosting the prices of the fewer Crown shares that would be on issue post-deal.

Originally published as James Packer is the key to new Crown Resorts play