James Packer’s CPH encouraged by Blackstone’s higher Crown Resorts bid

James Packer’s private company, Consolidated Press Holdings, says it is encouraged by the higher $8.9bn Blackstone bid for Crown Resorts.

Crown Resorts CEO Steve McCann had been pushed for a higher Blackstone bid. Picture Richard Dobson.

The Packer family’s hold over the Crown Resorts casino empire – spanning Sydney, Melbourne and Perth – could be coming to an end after the company’s board said it would support an $8.9bn bid from private equity firm Blackstone.

Consolidated Press Holdings, through which billionaire James Packer owns a 37 per cent stake in the business, said it was “encouraged” by the higher bid, the fourth Blackstone has made for Crown.

The new proposal, which remains subject to the completion of due diligence and final approvals from gaming regulators in Western Australia, Victoria and NSW, is 60c per share higher than the previous bid of $12.50 per share.

In a statement, the Crown Resorts board said – should a binding offer be made at that price – it was its “current unanimous intention to recommend that shareholders vote in favour of the proposal”.

Star Entertainment, which had last year proposed a merger of the two gaming groups, declined to comment. It has previously said it remained open to “exploring potential value-enhancing opportunities with Crown”.

In a note to clients, equity analysts at JP Morgan said the development was significant for two reasons – it removed doubt about whether the Crown board was willing to engage with Blackstone, and alleviated the risk that the private equity firm’s due diligence – including discussions with regulators in several states – would reveal more negative information.

“Given the bidder was granted non-public due diligence, it is noteworthy to see them increase the offer price … alleviating the fear of lingering surprises,” wrote the bank’s gaming analysts Don Carducci and Michael James.

“Prior instances of Crown’s board not engaging has potentially discouraged other parties … suggested Crown was not interested in selling,” they wrote.

“This has now changed and it is possible we see further interest.”

Star Entertainment was “still likely to get involved,” they said.

A bidding war for the company could significantly increase Mr Packer’s windfall. Under the currently Blackstone takeover proposal, he would receive $3.27bn.

The $13.10 per share proposal is also higher than the $13 per share price he sold a 9.99 per cent stake in the company to Melco Resorts in 2019, a sale that led to serious regulatory scrutiny in NSW due to concerns about the Hong Kong-based firm and its billionaire founder Stanley Ho’s links to underworld figures.

Analysts at other investment banks have previously estimated Crown could be worth more, with Credit Suisse in November calculating a “perfect execution” of a deal to divide the company into a gaming business and a real estate vehicle would value shares at $15.

In its statement, CPH said: “the assets of Crown are world class and this is reflected in the significant interest in the company”.

Another Crown investor, Forager Funds, said the company was a “high-quality and valuable asset and is worth more to private equity than it is ever going to be worth listed on the ASX”.

“It is likely that a deal will get done, the increase in offer price is a welcome step in the right direction and we are supportive of the board continuing a push for an appropriate firm offer for shareholders,” said the fund’s chief investment officer Steve Johnson.

Blackstone, the world’s largest private equity company, acquired Melco’s 9.99 per cent holding for $8.15 a share in April 2020.

In early December, the Crown board said it had concluded the $12.50 per share bid did “not represent compelling value”. However, it allowed Blackstone access to non-public information to undertake initial due-diligence.

“Following consideration of the revised proposal, including obtaining advice from its financial and legal advisers, the Crown board considers that it is in the interests of Crown’s shareholders to engage further with Blackstone on a non-exclusive basis,” the company said on Thursday.

“Accordingly, Crown has decided to provide Blackstone with the opportunity to finalise its due diligence inquiries and negotiate the terms of an implementation agreement so that Blackstone can put forward a binding offer.”

Despite recent regulatory concerns over its operations, including royal commissions in Victoria and WA, the company has been highly sought for years.

Suitors have included Wynn Resorts, which in 2019 entertained a short-lived $10bn bid, while Oaktree Capital Management, another US private equity group, made two $3bn proposals to fund a buyout of Mr Packer’s stake and clear his name from the share ­registry in exchange for debt and equity in the group.

The latest Blackstone bid is 75c per share higher than one it made and was rejected by Crown in May. The Victorian royal commission into Crown recently recommended that Mr Packer sell down his stake in Crown, held by CPH, 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 WA’s royal commission into Crown that he agreed to the selldown but the timing was open to interpretation, given CPH had 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.

The Bergin inquiry temporarily revoked Crown’s NSW casino ­licence, while the Victorian royal commis­sion recommended Crown be overseen by a “special manager” – who would have unprecedented power to veto board decisions and audit company accounts – for two years. In NSW, a final decision on handing Crown a licence for its Sydney operation is expected early this year.

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.

Crown is being advised by UBS and Gresham. Blackstone has engaged Morgan Stanley. Mr Packer’s CPH has hired Moelis Australia to handle the deal.

At an investor pitch last month, Crown’s new chief executive Steve McCann said the business has been materially de-risked from six months ago when he took over. “Crown shareholders have been through quite a lot, they are invested in some tremendous assets and deserve to be rewarded,” he had said.