Crown Resorts grants Blackstone due diligence

Crown has rebuffed Blackstone’s third bid, but CEO Steve McCann says a look at the books will determine whether the suitor can lift its price.

Blackstone’s latest takeover bid, disclosed on November 19, offers $12.50 cash per share – an increase of 15c from its previous offer. Picture: NCA NewsWire/David Crosling

Crown Resorts has set up a possible auction for itself, allowing private equity firm Blackstone access to its books while rejecting a takeover offer that values the gaming company at $8.5bn.

In a brief statement, the James Packer-backed company said the Blackstone proposal, its third, did “not represent compelling value for Crown shareholders”.

“However, the Crown board has offered Blackstone the opportunity to access non-public information to allow Blackstone to undertake initial due diligence inquiries on a non-exclusive basis so that it can formulate a revised proposal that adequately reflects the value of Crown,” it read.

Crown’s new chief executive, Steve McCann, will on December 13 provide the first investor update since Blackstone made its offer two weeks ago, and is expected to outline remediation plans agreed to with regulators and promote the benefits of the company’s reopened Sydney operation.

The Barangaroo casino is expected to be handed a gaming ­licence early next year, a move that the market expects will add pressure on any suitor to offer a higher price for the company.

The Australian’s DataRoom column first revealed on Wednesday that Star Entertainment had engaged Barrenjoey Capital Partners as it eyed a second attempt at the rival casino operator.

Equities analysts at Credit ­Suisse have estimated that Crown could be worth up to $15 a share, but say this price assumed there would be “perfect execution” of a deal to split the company into an operating business and a property-owning trust.

The analysts, Larry Gandler and Bradley Beckett, suggested other casino operators – including Las Vegas Sands – could also enter the race for Crown, but concluded it was more likely that Blackstone would emerge as the owner, albeit having paid a higher price.

Mr McCann told The Australian on Thursday that Crown’s share price was on an upward trajectory. “We need to make sure that anyone looking at Crown recognises we are coming off the bottom,” he said.

“We are nowhere near that full capacity today.”

Beyond what has been available to them through public documents tabled at inquiries in NSW and Victoria, Blackstone will be seeking more detailed information about Crown’s financial position and management.

Blackstone’s latest takeover bid, disclosed on November 19, ­offers $12.50 cash a share – an increase of 15c from its previous offer. Crown shares rose 8c to close at $11.02 on Thursday.

Mr McCann said that, because the due diligence process with Blackstone was not exclusive, “the doors are open to anyone who wants to have a look”.

A spokeswoman for Blackstone said the firm was appreciative of the different level of engagement with the new Crown board and welcomed that further engagement. Exactly how much more on the share price that Crown’s 37 per cent stakeholder, billionaire Mr Packer’s CPH, would want to agree to sell is unknown.

Mr McCann said the board wanted to make sure all shareholders got the right price outcome. “At the end of the day, there is one big shareholder obviously, CPH, and so for a scheme to be successful, they are going to need to support it,” he said.

“Fundamentally any bidder is going to have to get them over the line as well.”

Asked directly if the Crown board had received a message from CPH that the price was not high enough but that it would be open to engagement, Mr ­McCann responded: “We are not saying that. They are basically running their own race on this.

“We are separately as a board considering feedback from all shareholders, including CPH through their advisers, as to where they are at, but it is not a case of CPH signalling. Their advisers are talking to Blackstone’s advisers no doubt. They will be forming a view.

“I can’t really comment on any other discussions.

“Clearly by signalling to the market that we are entering into initial due diligence, we are signalling that the doors are open. There is a fair bit of speculation around alternatives and around what Star might do. At the ­moment that is speculation.”

The development comes as Ziggy Switkowski formally joined the Crown Resorts board this week, following regulatory clearance.

“A very steady pair of hands (and he) has been around a few corporate plays in his time. That’s useful,” Mr McCann said.

Crown has also been getting more comfortable with the probity process for Blackstone. “We have spoken to regulators as to how much work had been done there and to see if there was anything that we needed to be concerned about,” Mr McCann said.

“Without saying too much, there were no alarm bells there from our perspective. There is more to do but they have done quite a bit of work.”

Mr McCann added Crown was exiting a turbulent period – due to the pandemic and attention from regulatory agencies.

“We are open everywhere. We are very close to opening gaming in Sydney, hopefully early in the new year we will be able to do that, which will add another layer of value to the organisation,” he said.

“The properties are absolutely world class. Now that we have no restrictions on the gaming floor in Melbourne, we are getting back to pretty attractive turnover levels, momentum is growing significantly.

“We are in much better shape than we have been at any time in the last couple of years. As international borders open, Australia has not had anything like Crown Sydney to offer the international tourism market before.”

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

Mr Packer agreed to the selldown, but in October said the timing was open to interpretation.

Additional reporting: John Stensholt