Will $3b in cash be enough to heal Packer’s bruised reputation?

An $8 billion bid for James Packer’s Crown Resorts from giant US property and private equity group Blackstone wasn’t the way the script had been written.

The smart money was waiting for a proposal from Australia’s other major casino group, The Star, for a merger of the two casino giants - one that would be at least supported by Blackstone, which has a 10 per cent stake in Crown.

Crown’s board is busy putting out fires but now needs to contend with $8 billion bid.Credit: Nick Moir

Presumably, The Star would have been waiting until there was some regulatory clarity around Crown’s licences before putting any merger to the beleaguered Melbourne-based casino group.

But Blackstone has taken a more aggressive approach of putting Crown in play. Whether it has knocked The Star out of the game remains to be seen.

Needless to say, Blackstone’s offer is highly conditional, not just on receiving regulatory probity, but on getting its debt financing ticked off and receiving the support of the Crown board. Blackstone quietly set in train moves to receive regulatory approval to increase its stake in Crown several months ago - so it won’t be starting from scratch this week.

But it is Crown’s 37 per cent shareholder Packer who holds all the cards in who ends up owning the casino group. Blackstone has pitched its offer to the Crown board but it would be extraordinary if Packer has not been sounded out on price.

One would need to have been living under a rock to have not known that Packer is a very willing seller.

Well-placed sources who didn’t want to be identified said Packer had a meeting with the head of Blackstone Jonathan Gray when the private equity group acquired a 10 per cent stake in Crown from Melco a year ago. The story goes that Packer asked Gray if Blackstone would buy his 37 per cent.

History suggests Gray said no or a price couldn’t be agreed upon.

Fast forward 12 months and Blackstone has opened the bidding at $11.85 per Crown share. When news of the offer reached the market Crown’s shares flew up 20 per cent to meet the proposed price. As reality set in, the Crown share price began to drift down a little.

Given the highly conditional approach, there are plenty of opportunities for Blackstone to walk away or offer a lower price.

Clearly, Blackstone is an opportunistic bidder - even though the proposed offer represents a 20 per premium to Crown’s prevailing price.

And if the Crown board, headed by chairman Helen Coonan, thinks the overture is in the price ballpark, Blackstone will at the very least be invited to look at Crown’s books.

Blackstone will be invited to look at Crown’s book if the board, headed by Helen Coonan, thinks the price is in the ballpark.Credit: Louie Douvis

Crown’s share price has been depressed for more than a year on the back of the NSW regulatory inquiry into its suitability to hold a licence in that state and the subsequent announcement of two state-based royal commissions into whether it’s fit to hold licences in Victoria and Western Australia. And Crown’s casino closures due to COVID for most of 2020 has played havoc with its earnings and finances.

Smaller institutional shareholders were vocal on Monday about Blackstone’s attempts to steal the troubled casino group. But they won’t decide Crown’s ownership. Packer and his long-time supporters Perpetual have the register sewn up.

If Packer agrees to this offer he could walk away with around $3 billion and never set foot in Australia again.

Two years ago Packer would have been insulted by such an offer - one that was $2 shy of what he then wanted.

But the beaten-down billionaire, who has endured more scrutiny and criticism over the past year than he could have imagined and who is lining up for two more rounds in the royal commission ring, might be prepared to leave half a billion on the table for some peace.

If he agrees to this offer he could walk away with about $3 billion and never set foot in Australia again.

People close to him say he is loath to do any deal with The Star - which fought hard to block him from getting a casino in Sydney. This is despite the fact that a deal with The Star would rid Crown of a lot of suitability issues and a merger would create synergies unavailable to Blackstone.

If The Star wants to stay in the game it now needs to decide whether it has the stomach and the finances to go head to head with Blackstone which boasts numerous successful forays into the offshore casino industry.

Business Briefing

Start the day with major stories, exclusive coverage and expert opinion from our leading business journalists delivered to your inbox. Sign up here.