Barrenjoey aids Star in Crown contest

Crown’s managing director Steve McCann is understood to have informally ruled out a spin-off of the property arm of the casino operator. Picture: Darrian Traynor/Getty.

The Matthew Grounds-led Barrenjoey Capital Partners has emerged as an adviser to The Star Entertainment, fuelling suggestions it may make another play for Crown Resorts.

It come as the Crown Resorts board met for the first time with Ziggy Switkowski in the chair on Wednesday.

The emergence of Barrenjoey alongside The Star Entertainment Group in addition to its current adviser Credit Suisse was revealed by DataRoom online on Wednesday and offers a further indication that it remains in pursuit of its Australian casino rival.

Gaining the advice of Mr Grounds is being considered a stroke of genius by Star, given his deep insights into the psyche of James Packer and the Crown business.

Mr Grounds previously counted himself as the close adviser of Crown’s major shareholder Mr Packer, who is now working with advisory firm Moelis.

The seasoned investment banker was also previously the head of the Australian operations for UBS, which has been defence adviser to Crown Resorts for some time.

Crown’s Melbourne-based UBS banker Kelvin Barry was spotted in Sydney this week.

The talk in the market comes after Blackstone relaunched its efforts to buy Crown Resorts with a $12.50 per share offer, as announced on November 17, valuing the company at $8.5bn.

Crown’s board is yet to reject or accept the proposal and now Star remains in close focus as investors wait to see if it will also make a move.

Those close to the deal say that Mr Packer, who’s company Consolidated Press Holdings owns 37 per cent of Crown, would like Crown to open its books to Blackstone, not because the $12.50 per share bid is to his liking, but because it will get the process started.

Mr Packer has given an undertaking to various regulators that he will sell down to a stake of less than 5 per cent.

Star, run by Matt Bekier, made a $12bn scrip merger proposal on May 10 for Crown, but withdrew its offer in July.

Despite Star’s obvious interest, there is considerable scepticism about whether it will be able to mount a bid.

Market experts believe that winning a battle with Blackstone with a scrip offer would be challenging, if not impossible for Star.

But a capital partner may provide the fire power it needs to take on the private equity giant.

Compounding challenges for Star is that in a similar way to Crown, it finds itself at the centre of investigations surrounding money laundering at its Australian casinos, which are in Sydney and in Queensland.

Regulators may also take exception to the location of its head office, a point of contention amongst the recent Crown regulatory inquiries

A logical capital partner for Crown is considered to be Charter Hall.

Star Entertainment used Credit Suisse to run an auction of its property portfolio and it resulted in Charter Hall buying its Treasury Casino, Hotel buildings and its Queen’s Gardens Carpark for $248m, as announced on October 27.

A deal could work where Charter Hall owns the real estate.

However, Charter Hall typically partners with its pension fund clients on major transactions, and sources say that some are cautious about investing in casinos due to investment requirements around Environmental, Social and Governance factors.

Blackstone, which owns a 9.99 per cent stake in Crown, came forward with a $11.85 per share or $8bn offer for Crown on March 22 that was rejected by Crown’s board and Blackstone later withdrew the offer.

The challenge for any buyer of Crown remains gaining regulatory approval, although this column understands that some of Blackstone’s directors have already passed probity checks.

Market experts believe that Crown’s property empire accounts for about $8 of its $9.88 share price before the latest Blackstone offer emerged.

A spin-off of the property arm of the casino operator is not a priority for Steve McCann, Crown’s managing director, while Blackstone maintains its interest is in the whole group, despite strong suggestions that the real estate empire is its key focus.

It is understood that Mr Packer is close to Crown’s chairman Ziggy Switkowski and there is talk that he is a believer in the company’s share price increasing to around $12 by 2024, the deadline for when he needs to sell down his stake, as requested by regulators.

Applying a typical takeover premium on this price could see a bid emerge of about $15 per share at a later stage once full clarity emerges around Crown’s casino approvals from regulators.

Other private equity firms circling Crown such as Oaktree Global Management, are understood to have walked away from Crown for now, as have international players such as Wynn Resorts.