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Blackstone in talks with James Packer to push $8.5bn Crown Resorts bid

Blackstone has begun direct discussions with James Packer’s Consolidated Press Holdings – Crown Resorts’ largest shareholder – to back a $8.5bn takeover bid.

James Packer in Melbourne. It remains unclear if Mr Packer will accept the $12.50-a-share offer, although sources briefed on the talks say there is hope another party will enter the bidding process if discussions with Blackstone move ahead. Picture: Aaron Francis / The Australian
James Packer in Melbourne. It remains unclear if Mr Packer will accept the $12.50-a-share offer, although sources briefed on the talks say there is hope another party will enter the bidding process if discussions with Blackstone move ahead. Picture: Aaron Francis / The Australian

Blackstone has begun direct discussions with James Packer’s Consolidated Press Holdings – Crown Resorts’ largest shareholder – as it continues to raise pressure on the gaming group to move ahead with an $8.5bn takeover bid.

Mr Packer, whose significant influence over Crown was scrutinised in three inquiries into the ­casino operator, has yet to make any public commentary about the proposed offer made last week.

CPH, which owns 37 per cent of Crown, is being advised by Moelis.

Blackstone lobbed the all-cash bid for Crown last Thursday evening, and has since tried to convince Mr Packer and CPH to seriously consider the $12.50-a-share offer.

Accepting the offer would hand the businessman $3.12bn.

Crown, led by new chief executive Steve McCann, has yet to respond to the offer – Blackstone’s third. The private equity group has told the company it could conclude due diligence in four weeks and hopes to have the transaction complete early next year.

Meetings between Blackstone and CPH officials are understood to have taken place this week.

Crown share price and Blackstone offer prices.
Crown share price and Blackstone offer prices.

It remains unclear if Mr Packer would accept the $12.50-a-share offer, although sources briefed on the talks said there was hope another party would enter the bidding process if discussions with Blackstone moved ahead.

Despite recent regulatory concerns over its operations, including royal commissions in Victoria and Western Australia, Crown has been highly sought for years.

Melco Resorts, backed by Hong Kong gaming tycoon Lawrence Ho, bought into Crown in 2019, buying a stake in the company from Mr Packer. It later sold its holdings to Blackstone.

Other suitors included Wynn Resorts, which in 2019 entertained a short-lived $10bn bid, and Star Entertainment, which earlier this year had proposed a merger.

Oaktree Capital Management, another US private equity group, has made two $3bn proposals to fund a Crown buyout of Mr Packer’s stake and clear his name from the share ­registry in exchange for debt and equity in the group.

The Blackstone bid is 15c per share higher than one it made and was rejected by Crown in May. However, allowing Blackstone to undertake due diligence could encourage other interested parties to reconsider their own positions and make offers.

The Victorian royal commission into Crown recently recommended that Mr Packer sell down his stake in Crown, held by CPH, from 37 per cent to 5 per cent, with a deadline of September 2024 to complete the transaction.

Mr Packer has agreed to the selldown, though he said in an October appearance before Western Australia’s royal commission into Crown that he agreed to the selldown but the timing was open to interpretation, given CPH had already reached an agreement with NSW’s gaming regulator to extend a forced sale to October 2026.

CPH is now a passive shareholder in Crown in the wake of the Bergin inquiry in NSW that put a string of shareholder restrictions on Mr Packer to address his previous influence over the group, which had included having three representatives on the Crown board and access to information about the company.

Blackstone, the world’s largest private equity operator, has a 9.99 per cent holding in Crown, which it acquired from Melco for $8.15 a share in April last year.

Mr McCann said last week the Crown board would consider the bid and make a decision that would be in the best interest of all the company’s shareholders.

The Blackstone bid for Crown is subject to conditions including that the firm undertakes exclusive due diligence for four weeks and receives a unanimous Crown board recommendation in favour of the offer. Blackstone also requires final approval from its own investment committees.

Any acquisition would also be conditional on final confirmation of suitability of the Blackstone bid from regulators in Victoria, NSW and WA. Blackstone has also left open the possibility of revising its bid pending the outcome of anti-money-laundering investigations by the regulator, Austrac.

Blackstone’s previous bid for Crown was for $12.35 a share. At the time, Crown’s board unanimously concluded the revised offer undervalued the company and was not in the best interests of its shareholders.

Regulatory approval conditions across several jurisdictions were a stumbling block, with the board telling investors there was “significant uncertainty” as to the timing and outcome of the ­regulatory approval process. The Bergin inquiry temporarily revoked Crown’s NSW casino ­licence, while Victorian commis­sioner Ray ­Finkelstein recommended Crown be overseen by a “special manager” – who would have unprecedented power to veto board decisions and audit company accounts – for two years.

This was proposed instead of ripping up Crown’s licence, which Mr Finkelstein said would not be in the public interest in Victoria.

In NSW, a final decision on handing Crown a licence for its Sydney operation is not expected until early next year, The Australian reported this week.

The Independent Liquor and Gaming Authority, which in February was handed the Bergin report, had originally indicated it expected an agreement for the opening of the gaming floors of the Barangaroo casino by November. But the regulator is set to not finalise a deal with Crown until the first half of 2022.

ILGA officials met again with Crown representatives on Monday as the two parties continue to discuss the company’s new casino.

Crown is being advised by UBS and Gresham. Blackstone has engaged Morgan Stanley.

However, equity analysts are pessimistic about the chances of an agreement at $12.50 a share.

CLSA analyst Justin Barratt, in a note to clients last week, said he did “not expect the updated offer from Blackstone to be enough to get shareholder support”. “(But) we believe it highlights the overall value in Crown’s premium assets, and we see the potential for an ­improved bid from Blackstone or other potential acquirers,” Mr Barratt wrote on November 19.

Read related topics:James Packer

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Original URL: https://www.theaustralian.com.au/business/companies/blackstone-in-talks-with-james-packer-to-push-85bn-crown-resorts-bid/news-story/ed204787d30ac9c09fda26e312ea8f46