Crown Resorts gets $8bn Blackstone takeover offer

The James Packer-backed Crown is in play after Blackstone lobbed an offer, but a major investor ruled out support for the bid.

The future ownership of the James Packer-backed Crown Resorts is in play after American private equity giant Blackstone Group lobbed an unsolicited takeover bid for the Australian casino giant, a move described by the NSW gaming regulator as “the market at work”.

Crown shares closed 21.4 per cent higher at $11.97 on Monday – their highest level since January last year – after Blackstone presented an offer to the Crown board on Sunday to buy all of the company’s assets in Sydney, Melbourne and Perth for $11.85 cash per share, a 19 per cent premium to the average price of Crown shares since the release of its first half results.

The offer – which is conditional on debt funding, Crown board approval and regulatory confirmation that a Blackstone-owned Crown would be considered suitable to own and operate its casino licences – values the embattled casino giant at $8.02 billion.

Blackstone has previously applied for probity approval from the NSW Liquor and Gaming Authority to increase its 9.9 per cent stake in Crown.

The status of that application, which is said to have been made six months ago, remains unclear and while ILGA chairman Phillip Crawford on Monday said he was “pretty neutral” about Blackstone’s move, he suggested it showed the value of the free market at work.

“When I can I will be talking to the people on the Crown board about Blackstone’s move. But I’ve said before that the market will sort out things here. Maybe this is the first opportunity for that to arise,’’ he told The Australian.

“But in the meantime we will continue to do what we have to do with regard to the Sydney licence issue.”

ILGA is said to have been heartened by Crown’s comprehensive response so far to its multiple requests for changes to its governance and structure and its now waiting for the results of a full inquiry into its financial accounts by accounting giant Deloitte, which is underway.

Blackstone’s pitch to the Crown board centres on its decade-long history in Australia when it has invested $14 billion, including $12 billion in property.

Blackstone is already a casino investor, owning the Cosmopolitan casino and the property assets of MGM Resort’s Bellagio casino, both on Las Vegas’s famed strip.

Blackstone made its investment in Crown at the end of April last year when it seized a 10 per cent stake from Lawrence Ho’s Melco Resorts.

At the time it declared its desire to be a helpful and constructive shareholder of Crown. It has since remained silent.

The bid is also opportunistically timed ahead of the start of Royal Commissions into Crown in Victoria and Western Australia and pitched to give the Crown board and investors certainty as the company also faces class actions and investigations by the financial crimes regulator AUSTRAC and potentially the Australian Securities and Investments Commission.

The raft of regulatory issues for Crown have stemmed from the bombshell findings of the ILGA inquiry headed by former NSW Supreme Court Justice Patrica Bergin, which found deficiencies in Crown’s governance and risk management, which allowed money laundering to occur at its casinos.

The Bergin inquiry also recommended James Packer’s influence over the company and the voting rights attached to his 37 per cent shareholding be dramatically reduced given its contribution to Crown’s poor governance.

Blackstone is now expected to seek meetings with Crown’s shareholders, including Mr Packer and Perpetual, which has 8.2 per cent of the company.

Monday’s share price surged boosted Mr Packer’s wealth by more than $400 million.

Perpetual declined to comment on Monday, but it is believed to be supportive of Crown executive chairman Helen Coonan and the board engaging with Blackstone.

Anton Tagliaferro, investment director of Crown shareholder Investors Mutual, said he was “still assessing” Blackstone’s offer.

“It is difficult to put a valuation on Crown, it’s got a set of very unique assets globally – not just in Australia – and there’s obviously a cloud over the company in the short term,” he said.

“But assuming the company gets through that, Crown owns three – actually owns the physical properties which by themselves are worth around $7 dollars a share, so then it’s a matter of what the licences are worth.”

Mr Tagliaferro, who owns roughly 2 per cent of Crown, said there would likely be competing bids for the company’s assets.

“I don’t think it’s a knockout price by any means … As I said, there’s clearly a lot of value in Crown, once the licensing issues are resolved.

“I am sure Blackstone is attracted to casino assets in the middle of three major growing cities in one of the richest countries in the world. They know what they are doing.

“A lot of it now depends on James Packer because he owns nearly 40 per cent of the company.

“So the future depends on his assessment of value, because his block will be crucial in determining the outcome of any bid, and there will likely be more than one.”

Other potential bids could emerge from US casino group Wynn Resorts, which has previously expressed interest, its rival Las Vegas Sands or from Crown’s local rival The Star Entertainment Group.

The latter would require approval from the Australian Competition and Consumer Commission.

Crown investor Lanyon Asset Management on Monday ruled out support for Blackstone’s offer, saying it undervalued the company by more than 35 per cent.

Lanyon, which has been amassing a stake in Crown for the past six months to the point it is the fifth biggest stock in its fund, said the beleaguered company’s share price was suppressed by “transient factors” and Blackstone’s offer was opportunistic.

Lanyon said it believed the company was worth at least $16 a share.

“We are attracted to the company’s world class, highly cash generative, long life, monopoly assets. We believe the share price is currently suppressed from transient factors including regulatory uncertainty and COVID-19 restrictions that will both pass in time,” Lanyon wrote in its note.

“We believe that CWN’s earnings will recover faster than the market seems to be anticipating, from thriving domestic tourism and significant profit potential at Crown Sydney, which seems to have gone unnoticed.

Macquarie Equities said the Blackstone offer implied a multiple of 9.4 times its earnings estimate for Crown for the 2023 financial year, and 8.3 times its estimate for 2024 year.

These compared to Crown’s historical trading range of between 7.9 times and 10.6 times earnings.

Crown said on Monday its board had yet to form a view on the merits of the takeover proposal and would now assess it.

Crown has appointed UBS as financial adviser and Allens as legal adviser in relation to the proposal. Morgan Stanley is advising Blackstone.

Mr Packer has previously indicated he is a willing seller of his stake in Crown after offloading part of his stake to Melco Resorts in 2019 and negotiating with Wynn Resorts in 2019 for a potential takeover of the company, which did not proceed.