Crown chair Helen Coonan has recovered some value for Crown shareholders who now have competing bids before them plus a credible, albeit highly remunerated, chief ready to sit at the table.
The Oaktree proposal was laughable; the choices on the table are now for a chief executive-led turnaround, a clean all-cash offer from Blackstone and an offer from rival Star Entertainment that has its own regulatory risks.
Three months ago when Patricia Bergin handed down her report on Crown the company’s prospects looked dim, and those for major shareholder James Packer looked even worse.
He now looks to have a chance for a higher payout for his 36 per cent stake in the company but with each potential deal the reality looms larger that his exit is more certain and his dream scenario of a lasting monument in Sydney lies in tatters.
The final chapter is still a long way from being written.
Helen Coonan has presided over one of the more egregious corporate pay deals in Australian history as she prepares the ground for a probable takeover of the company.
On the same day a bid emerged from rival Star Entertainment, valuing the company at $14 a share based on its own highly inflated synergy benefits, Coonan agreed to terms with outgoing Lend Lease boss Steve McCann, promising $5.6m in payment if the company changes hands.
Throw in turn-up-to-work pay of $2.5m and McCann at worst picks up $7.9m for a job which might not last the year.
The granting of 400,000 performance rights is subject to shareholder approval, but Coonan said the cash equivalent would be paid and if a “fundamental change” happened before vesting then McCann would collect anyway.
In practical terms the cost of the deal will be the responsibility of the winning bidder, but the terms treat Crown shareholders — including 36 per cent owner James Packer — with absolute contempt.
Packer’s thinking would no doubt have been considered and in choosing McCann to start on June 1, one day after he finishes after 13 years as Lendlease boss, Crown has hired an expensive internal merger and acquisition practitioner with hands-on corporate experience.
Given Coonan demonstrably has zero, McCann is at least a step in the right direction.
The Star bid will be subject to ACCC approval and will test a novel use of the competition rules.
Former chief Graeme Samuel and the Productivity Commission have argued that in the case of gambling dens, normal competition rules don’t apply.
The argument is competition is normally encouraged to deliver better terms for consumers and hence the economy.
In the case of two casinos in Sydney the argument is twofold. Firstly the casinos are highly regulated, and secondly the last thing the community wants is better terms to encourage more gambling.
That being the case, it doesn’t matter if there is a monopoly.
That is a novel argument but it’s a bit like approving a tobacco merger — who cares about no competition for lung cancer? The fact is the ACCC will take a close look at this deal because while gaming prices might not be subject to competition, experience is, and in his final year in the job ACCC boss Rod Sims is not about to wave through a national monopoly.
Star’s John O’Neill and Matt Bekier then face this hurdle among others but have the advantage of being the only local operators in the game.
The Star offer includes a cash alternative for 25 per cent of the shares, which would leave Packer with some shares in the combined company.
Its claim of a $14 bid is based on looking at its own stock over five days, not a more conventional three months, which would put the bid price at more like $12.53 a share.
This is only just ahead of the Blackstone $12.35-a-share bid which was lobbed on Saturday, one day before the rival Star deal appeared.
The Crown board clearly had takeovers in mind when it signed the deal with McCann.
Blackstone will be rightly selling its proposal as being the cleanest alternative with minimal regulatory hurdles.
Star has cleared the probity tests but faces the ACCC gauntlet and state approvals.
A new offer could of course also emerge.
Either way it is an inglorious end to the grand James Packer corporate dream.
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Google in app battle
The battle of the mobile apps steps up with Google now seeking leave to appear on Apple’s side of the argument against US games maker Epic.
As reported late last month, the Australian Competition & Consumer Commission has now joined the case as a friend of the court.
Epic, the maker of computer game Fortnite, took action against Apple alleging breach of market power rules due to Apple’s refusal to allow app suppliers to use their own payments service and charges of 30 per cent of app revenues.
Justice Nye Perram ruled the matter should be heard in the US first, because that is where the contract was struck, even though the case is under Australian competition rules.
Epic, which is valued at $US28.7bn ($36.5bn) appealed to the full Federal Court, which will hear the matter on June 9.
Google and Apple control platforms housing 100 per cent of the mobile market and both charge 30 per cent of revenues.
Google also pays Apple $US10bn a year to ensure its search functions have top spot on Apple phones.
Google supports the Apple claim because it insists on all contracts being signed at its Californian base, including the recent media deals.
If the ACCC took action against Google it would be heard in Australia but under Justice Perram’s ruling any contractual matter between parties would be heard in the US even if under Australian law.
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Holding court
Volkswagen is seeking leave to appeal to the High Court against the full Federal Court’s decision to impose $125m in fines against the company for misleading diesel emissions claims.
The ACCC and VW have agreed to a $75m penalty but the court ruled that inadequate and imposed a higher penalty.
The issue will be tested again on Thursday when Justice Debra Mortimer in the Federal Court hands down her decision in the Telstra case.
Telstra and the ACCC agreed to a $50m fine for admitted unconscionable behaviour by some of its licensed shops in phone deals with Indigenous people in northern Australia.
While Telstra pleaded guilty and agreed with the ACCC on the size of the penalty, the may impose a higher fine.
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