Investors tell Crown Resorts to do a deal quickly

The largest institutional investor in the James Packer-backed Crown is demanding it immediately start a formal sale process.

Chair of the NSW Independent Liquor & Gaming Authority Philip Crawford speaks at a press conference in Sydney on Thursday. Picture: Joel Carrett

The largest institutional investor in the James Packer-backed Crown Resorts has demanded the company’s board immediately start a formal sale process for its suite of Australian casino assets amid growing frustration from investors with the gaming giant’s delays in engaging with willing bidders.

Perpetual’s head of equities, Paul Skamvougeras, said this week’s move by Star Entertainment to propose a nil-premium $12bn merger with Crown highlighted the attraction of the company as a takeover target despite the regulatory risks surrounding its licences in Sydney, Melbourne and Perth.

“There is clearly a lot of interest in Crown’s world-class assets. Given this interest, it makes sense for the board to immediately commence and fast-track a formal sale process concurrent with its consideration of the proposals presented by Star Entertainment, Blackstone and Oaktree,’’ Mr Skamvougeras told The Australian.

Perpetual’s Paul Skamvougeras at his office in Sydney.

“It is incumbent on the board and its advisers to extract the highest value for shareholders.”

A formal sale process would involve Crown’s advisers, UBS, establishing a dataroom to allow bidders for the company to conduct formal due diligence, which would allow them to better structure and value their offers.

Perpetual is the largest institutional shareholder in Crown with an 8 per cent shareholding, behind US private equity giant Blackstone, which holds a 10 per cent stake.

Blackstone on the weekend increased the value of its takeover offer for Crown, first made in late March. The offer is subject to a raft of conditions, including being granted due diligence by the Crown board led by chairman Helen Coonan.

The Crown board reaffirmed this week that it had not yet formed a view on the merits of the Blackstone offer, and has commenced a formal process to review The Star merger proposal.

Crown declined to comment, but it is believed to have been actively engaging with Blackstone behind the scenes and will do the same with Star.

The Star offer will also be subject to a public review by the competition regulator given the combined mega-casino group would own flagship casinos in Sydney, Melbourne, Western Australia, Brisbane and the Gold Coast.

A third suitor, US investment fund Oaktree Capital, last month offered $3bn to fund Crown’s buyback of Mr Packer’s Consolidated Press Holdings’ 37 per cent stake in the company.

James Packer appearing via videolink at the NSW gaming inquiry in 2020. Picture: Supplied

CPH has retained Moelis Australia as its adviser to evaluate any offer for its Crown shareholding.

Mr Packer is willing to entertain any proposal from potential Crown suitors and it is believed he would be welcome the Crown board engaging with Star on its proposal.

The scrip offer also contemplates a cash alternative of $12.50 per Crown share, subject to a cap equal to 25 per cent of Crown’s total shares on issue, which would allow Mr Packer to initially take some cash off the table and retain a passive interest in the merged company to share in the upside.

It is understood Star could offer more cash in the bid to allow CPH’s stake in the merged entity to fall further, which may be welcomed by casino regulators.

In February the NSW Bergin inquiry, which found Crown ­unsuitable to operate its Sydney casino, recommended no ­individual shareholder in a casino company hold more than 10 per cent without regulatory approval, citing Mr Packer’s “deleterious” influence on Crown in the past.

Melco International’s Lawrence Ho Yau-lung, Wynn Resorts chairman and chief executive Steve Wynn, and James Packer in Macau in 2006. Picture: SCMP

Anton Tagliaferro, investment director of another Crown ­shareholder, Investors Mutual, said this week that Star’s offer ­undervalued Crown and Mr Packer remained the kingmaker in the negotiations with suitors.

In its report, the Bergin inquiry noted CPH in 2019 was “briefly approached by another unnamed United States casino operator about a possible acquisition of CPH’s interest in Crown but the approach was withdrawn before any substantive discussions occurred.”

This was after merger negotiations with US casino giant Wynn Resorts broke down that year amid concerns by Macau’s Gaming Inspection and Coordination Bureau (DICJ) about Crown after 19 of its employees were arrested in mainland China for the illegal promotion of gambling in late 2015.

It was revealed in the Bergin inquiry hearings that Wynn had been informed by regulators in jurisdictions in which it operated its business — in Nevada, Massachusetts and Macau — that they may oppose the Crown transaction.

There is speculation the Macau gaming regulator still ­remains opposed to any US casino operator with assets in Macau from making a play for Crown.