Blackstone gets FIRB approval for $8.9bn Crown Resorts takeover, conditions remain

The approval clears a key hurdle for the US private equity giant, but the deal is still subject to other conditions, including the scale of Crown’s blockbuster Austrac fine.

Crown Resorts is a step closure to falling under the control of US private equity giant Blackstone after FIRB approved the $8.9bn takeover.

US private equity giant Blackstone is a step closer to expanding its casino empire across five continents after the Morrison government approved its $8.9bn takeover of Crown Resorts.

But uncertainty still clouds the deal, which if successful would add Australia to Blackstone’s casino operations in the US, Latin America, Spain and Morocco.

While the Foreign Investment Review Board has told Blackstone the Commonwealth government has “no objections” to the deal, Crown Resorts said in a statement to the ASX the takeover remained “subject to a number of other conditions … as outlined in the scheme implementation deed”.

One of these conditions is the scale of a blockbuster fine that the James Packer-backed group faces from the financial crime watchdog.

Austrac launched legal action against Crown earlier this month, accusing the group of more than 500 breaches of anti-money laundering and counter-terrorism financing laws.

Each breach could attract a fine of up to $22.2m, and if the company is fined at least $750m, it could trigger an exit clause for Blackstone from the Crown deal.

This penalty would put it in the same territory as Westpac and Commonwealth Bank, which Austrac fined $1.3bn and $700m, respectively, over anti-money laundering breaches.

In a statement of claim totalling 863 pages, damning revelations included Crown dealing with patrons involved in sex slavery – one as late as November last year, a month after Victoria’s royal commission found the company no longer suitable to hold a licence for its flagship Melbourne casino.

Analysts have accounted for this risk in Blackstone’s takeover of Crown, but estimates of the scale of Austrac’s fine vary.

Macquarie has estimated the penalty at $250m, while E&P expects it to be lower at $189.6m, or 5 per cent of Crown’s market capitalisation.

In the past week, Crown’s shares have gained 1.2 per cent to $12.60 – still below Blackstone’s offer of $13.10 a share.

On Tuesday the shares closed up 0.9 per cent at $12.71 each.

“Crown has been informed by Blackstone that Blackstone has received written confirmation from the Foreign Investment Review Board (FIRB) that the Commonwealth government has no objection to Blackstone’s proposed acquisition of Crown,” Crown said in a statement.

“The implementation of the scheme remains subject to a number of other conditions, including approval from gaming regulatory authorities, Crown shareholder approval and court approval, as outlined in the scheme implementation deed.”

On Tuesday the Federal Court approved a scheme meeting for Crown shareholders to vote on the takeover at 10am on April 29.

Blackstone completed extensive due diligence on Crown, including visiting RSLs in southwestern Sydney to check the competition and top tourist offerings in Sydney and Melbourne, including Taronga Zoo and golf courses.

The suburban RSL clubs – of such a scale they appear as mini casinos – were meant to cater for a different clientele to Crown’s massive Barangaroo complex.

But the Covid-19 pandemic has decimated overseas high-roller revenue, forcing Barangaroo to tilt to catering for the domestic market.

It is no longer competing with the other casino in town, The Star, but Sydney’s leagues clubs.

Blackstone is known as a “super investor”.

Its private equity division has some $US120bn ($160bn) in assets under management and another $US30bn ready to invest.

Its global real estate portfolio is worth more, valued at $US448bn.

Its real estate investments include Las Vegas’s MGM Grand/Mandalay Bay, which it bought for $US4.6bn in 2020.

It also owns the Bellagio casino, which it snapped up for $US4.25bn in 2019.

It has used its substantial coffers to turnaround another Las Vegas casino, The Cosmopolitan, which it bought from Deutsche Bank for $US1.73bn in 2014.

It poured $US500m into the casino, renovating 3000 rooms, building another 67 rooms and suites before overhauling the menu and gaming floor to transform it into one of Las Vegas’ premium gaming complexes.

Blackstone became a big player in Latin America after it snapped up casino giant Cirsa from Spanish billionaire Manuel Lao Hernández for an undisclosed sum in early 2018.

As part of the deal, it also acquired five casinos in Spain and two in Morocco.

Cirsa’s casinos in Argentina – where Mr Packer owns his Ellerstina polo ranch hideaway – were not included in the deal, remaining under the Lao family’s control.