From Las Vegas to Colombia: Inside Blackstone’s gaming empire
Blackstone is hoping to add Crown Resorts to its multi-billion dollar casino portfolio, which includes more than 120 casinos across South America.
Big, flashy and worth billions of dollars, Blackstone’s casinos on the Las Vegas Strip have attracted plenty of attention.
But the American private equity giant has plenty of experience in farther-flung locations – some which may pique the interest of local regulators who must decide whether to give Blackstone the green light for expansion into Australia’s gaming sector.
Far south of the US border, beyond Mexico way – where, incidentally it owns 21 casinos – is where Blackstone has the lion’s share of its gaming empire. It has 66 casinos in Colombia, 34 in Panama and 29 in Peru – with another eight in Costa Rica and six in the Dominican Republic.
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.
Australian gaming regulators will examine the portfolio should Blackstone succeed in its bid for Crown, which it increased from $8.5bn to $8.9bn on Thursday. Casino ownership has been thrust into the spotlight after Crown fronted three separate inquiries in NSW, Victoria and Western Australia amid explosive revelations it facilitated money laundering and other organised crime.
The inquiries made Mr Packer a forced seller, with the Victorian royal commission into Crown recommending he sell down his 37 per cent stake in the company to below 5 per cent by September 2024 – sending a strong message about who or should not own Australian casinos.
But Blackstone is a polished outfit and the NSW Bergin Inquiry and Victorian royal commission, merely noted it already owned 9.99 per cent of Crown. The inquiries made no mention of that shareholding in its recommendations. Further, Blackstone has been subject to scrutiny from the NSW independent Liquor and Gaming Authority (ILGA) and is understood to pass most of its regulatory checks with the final step being a transaction for ILGA to approve.
“I would expect that the due diligence and discussion with Blackstone on their probity will be completed by the end of the month,” ILGA chairman Philip Crawford said last October.
Spain’s Cinc Dias newspaper reported last month that Blackstone is considering a public listing of the Cirsa business in a deal that could be valued up to €3bn ($4.71bn). According to the report, Blackstone has engaged Lazard as an adviser and pencilled in April as the float date. Blackstone is yet to provide details on a potential listing of Cirsa, which markets itself as delivering a “personalised leisure experience”.
“We know every client is unique – this is our driving force. We understand our visitors, which means we can always offer the best leisure options for each and every one,” it says.
At the time of the Cirsa acquisition, Blackstone head of European private equity Lionel Assant said the firm would throw its support behind Cirsa’s long-serving chief executive Joaquim Agut, who joined the company in 2006 and delivered 47 consecutive quarters of earnings growth. “Joaquim and the team have delivered outstanding, consistent profitable growth over the last 12 years, building Cirsa into a leading international gaming and leisure operator,” Mr Assant said in April 2018.
Mr Agut meanwhile said: “Blackstone has a distinguished track record in helping companies reach their full potential and establishing global champions”.
Blackstone is known as a “super investor”.
Its private equity division has some $US120bn ($165bn) 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.
The efforts paid off, with Blackstone selling The Cosmopolitan for $US5.65bn last September, saying the casino’s “recent performance has been stronger than ever, exceeding pre-Covid levels in the second quarter of 2021”.
Including cash flow from the property, Blackstone said it made almost 10 times the amount of equity invested in The Cosmopolitan.
“The management team and employees at The Cosmopolitan, led by chief executive Bill McBeath, flawlessly executed an ambitious business plan, including navigating a challenging period for the entire industry, to position the property for such a high level of success,” said Blackstone Real Estate head of acquisitions Americas, Tyler Henritze.
Blackstone’s sweetened offer for Crown comes as the ASX-listed company’s near 30-year-old flagship complex in Melbourne will likely need significant capital expenditure in coming years to keep pace with Crown Perth, which has undergone a $1.3bn renovation, and its new $2.1bn casino complex in Barangaroo.
With the clock ticking on Mr Packer offloading his shareholding, Crown’s board is listening.
“Following consideration of the revised proposal (from Blackstone), 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 in a statement to the ASX.
“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.”
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