After Crown Resorts offer, what next for Blackstone?

Some believe Blackstone’s intention with its Crown bid is to open the way for negotiations over the casino operator’s lucrative property portfolio. Picture: Dylan Coker

Global buyout fund Blackstone is understood to have gone to its investment committee with two deals last Thursday night.

One of them would surely be its $8 billion approach for Crown Resorts, which was confirmed to the market by the James Packer-backed casino operator on Monday.

But now questions remain about what else Blackstone could have in its sights.

Speculation has circled for months that it has been looking at the country’s largest office landlord, Dexus Property Group, which has a market value of about $10bn.

Blackstone was the underbidder in a contest for the $3bn-plus Investa Office Fund in 2018.

But some are doubtful that it will make a play for Dexus given that the New York financial powerhouse is more interested in the ownership of hard assets rather than funds management, which is a major component of Dexus.

Logical targets are Sanjeev Gupta’s steel construction product manufacturing business InfraBuild, the $2bn mining consumables business Molycop, which is on the market, and Westpac’s $11bn auto loans and dealer finance portfolio and BT Panorama wealth management platforms, also up for sale.

Morgan Stanley was revealed by DataRoom online on Sunday to be behind Blackstone’s Crown move, and it is no surprise.

When Blackstone fought for Investa, it was aided by real estate investment banker Tim Church, who has since moved from UBS to Morgan Stanley.

Along with JPMorgan, Morgan Stanley is also working on the sale of Blackstone’s Milestone Logistics Group, which is soon to leave it flush with cash for more mergers and acquisitions.

This is given that the Australian industrial property portfolio is on track to sell for at least $3.5bn to one of five short-listed bidders after final bids are due next month.

After The Australian reported news of the Blackstone bid for Crown online on Sunday night, some investors spoken to by DataRoom said that any offer would need to be at more than $13 per share before they would accept it or it would likely be accepted by the board - higher than the $11.85 per share cash that is currently on the table - given the company’s turbulence with government inquiries into its operations.

James Packer, who owns 37 per cent of Crown Resorts, would also see the Blackstone offer as highly opportunistic.

But what the offer does is put Crown in play and some believe Blackstone’s intention with the low-ball approach is to pave a way for negotiations over its lucrative property portfolio.

Crown owns the real estate at its Barangaroo casino development in Sydney, its casino and two hotels in Perth along with a golf course, its Melbourne casino and land next door.

In its half year accounts, Crown valued its property, plant and equipment at about $5bn, as of

December.

There have been $870m worth of apartments sold in its $2.2bn Barangaroo development.

Crown looked at a $2bn real estate spin-off about four years ago through Deutsche Bank, UBS and Morgan Stanley, and with Blackstone buying just under 10 per cent of Crown last year that is now housed in one of its real estate funds, it will likely have some influence in pushing for a separation of the property assets.

Yet others say that making a low-bid offer before coming back with a higher offer is straight from Morgan Stanley’s playbook, taking on the same strategy when it helped the US-based Hometown bid for previously listed Australian retirement operator Gateway Lifestyle.

With royal commissions hanging over Crown’s head after the NSW government inquiry, clearance to run its casinos could take more than a year, and Blackstone could struggle to gain regulatory approval.

Mr Packer was said to have talked about a deal on Crown with Las Vegas Sands founder Sheldon Edelson before he died this year.

Las Vegas Sands has been selling casinos in Nevada and has a strategy of increasing its presence in the Asia Pacific.

If Blackstone takes Crown’s real estate, one possibility is that Las Vegas Sands eventually gains operational control.