James Packer in talks with TPG to privatise Crown Resorts

James Packer is working on a $4bn deal to privatise Crown Resorts that could remove his family company from the ASX.

James Packer out walking in Tel Aviv in August.

Billionaire casino magnate James Packer is working on a proposal to privatise his Crown Resorts in an almost $4 billion deal that could remove the Packer family from the Australian share market.

It is understood Mr Packer had been in talks to partner with US private equity giant TPG over the buyout, which has yet to be presented to Crown’s independent directors.

However the talks are understood to have ended several weeks ago.

While a plan is under consideration no announcement is imminent, with share price a key consideration for Mr Packer.

The billionaire is believed to consider Crown (CWN) shares are undervalued, but will only proceed with a partner.

One source said the deal could be resurrected - even as a partial privatisation - next year.

Mr Packer already controls 53.1 per cent of the $7.9 billion listed Crown Resorts, which owns casino and hotel complexes in Melbourne and Perth and is developing the $1.5 billion Crown Sydney complex at Barangaroo in Sydney.

The move comes as Crown shares have been in decline over the past month. The stock traded as low as $9.80 in the past year.

But today Crown shares surged on speculation about a move to privatise the company, climbing nearly 14 per cent to $12.12 at 2.21pm (AEDT).

 

Mr Packer’s stake in Crown Resorts is worth $3.7 billion and is controlled by his private company Consolidated Press Holdings.

Overseas, the listed Crown also owns and operates the Crown Aspinall’s casino in London and has one third of Melco Crown Entertainment, which operates casino complexes in Macau including the City of Dreams and the just-opened Studio City complex.

Melco Crown is co-owned with Chinese billionaire Lawrence Ho.

TPG is one of the world’s biggest private equity firms, with $US74.3 billion in capital under management. In Australia the group is run by Ben Gray.

Its global billionaire principal David Bonderman is close to Mr Packer, with the pair discussing various potential joint deals over recent times that have failed to come to fruition.

A privatisation of Crown by the pair would see them share in a portfolio of other gaming investments that include Crown Bet and a just purchased quarter share of the Nobu hospitality group, in which Crown is an investor alongside Hollywood actor Robert De Niro.

The move comes as Mr Packer spends less time in Australia. He maintains a home in Los Angeles where his three children to model ex-wife Erica Baxter now live. He is also building a home in Israel’s capital Tel Aviv, nearby that of his friend and Israeli Prime Minister Benjamin Netanyahu. Mr Packer now lists Tel Aviv as his home so for Australian tax purposes he is considered an Israeli resident.

James Packer out walking in Tel Aviv in August.

This year he has also begun a relationship with pop diva Mariah Carey.

Mr Packer recently stepped down as chair of Crown Resorts in favour of a lesser executive directorship of the company, handing over the chair to the chief executive of his private company, former investment banker Rob Rankin.

The mooted privatisation would come in a year that has seen landmark change for Mr Packer and his family.

He recently settled with his sister Gretel Packer on an agreement to carve up the family fortune in the wake of father Kerry Packer’s death from kidney failure on December 26, 2005 — a deal that was believed to worth more than $1.25 billion. Ms Packer retains a residual interest in the ConsPress vehicle.

The privatisation would further remove Mr Packer from the Australian public landscape and would come at an opportune time, with the Crown share price under significant pressure over the past year.

A downturn in gaming activity in Macau following a crackdown on Chinese corruption has significantly impacted the performance of the Melco Crown joint venture and Crown shares, which had traded as high as $16.12 in the year.

Mr Packer recently told the market that his ConsPress had an interest in almost 22 million Crown shares to increase its stake in Crown by 3 per cent at a cost of $260 million.

Mr Packer increased the stake via the use of a derivate product provided by Swiss investment bank UBS. A range of institutions are known to have sold into the UBS buy up of Crown stock for Mr Packer, including funds management giant Perpetual.

The privatisation plan is not the first time that Mr Packer has considered such a move. During the GFC, when Crown shares were also under pressure, a similar move was seriously considered but did not eventuate.

Mr Packer and ConsPress are believed to be being advised by long-time confidante Matthew Grounds, from investment bank UBS.

Presentation of any proposal to the 13-member Crown board would see the independent directors effectively break away from the broader group to consider the deal on behalf of minority investors.

The directors, which include adman Harold Mitchell, former Qantas chief executive Geoff Dixon and former AFL CEO Andrew Demetriou, would likely engage their own advisers as well as seek an independent expert report on the merits of a deal for unaligned shareholders.

To gain full ownership of the company Mr Packer would need to convince owners of the 46.9 per cent of shares that he doesn’t own of the merits of his offer.

Only 80 investors, including Mr Packer, have more than 100,000 Crown shares, while less than 1000 investors have parcels of between 10,000 and 100,000 shares, with the thin register meaning that the logistics of an offer would be relatively streamlined.