Star Entertainment bid for Crown Resorts expected with rivals yet to show their hands

Crown is yet to accept Blackstone’s $12.50 per share offer announced on November 17, but has opened its doors to due diligence. Picture: Getty Images

Star Entertainment is expected to emerge with a rival bid for Crown Resorts in February after Blackstone came forward with a $8.5bn approach for the James Packer-backed business in November.

But some are wondering whether there could be more than two players gunning for the Australian casino operator, with Wynn Resorts and Las Vegas Sands yet to show their hand.

Crown is yet to accept Blackstone’s $12.50 per share offer announced on November 17, but has opened its doors to due diligence.

While billionaire Packer, who owns 37 per cent of Crown through his Consolidated Press Holdings business, needs to sell down to below 5 per cent by 2024 to appease regulators, expectations are that he will be lobbying to secure top dollar.

The talk in the market has been that Packer believes a price of about $15 per share is more appropriate for Crown as he bets on improvements in the group next year under the leadership of CEO Steve McCann and chair Ziggy Switkowski.

Packer will no doubt be drawing on the close connections he has in the casino world.

DataRoom understands Packer had an agreement in place with the late Sheldon Adelson to sell the business to Las Vegas Sands before the American casino mogul passed away at the start of this year.

The strategy of Las Vegas Sands has been to sell casinos in the US and focus on Asia, which could see it look at Australia as well.

Founded by Adelson, Las Vegas Sands is said to generate about $4.5bn from its Marina Bay Sands casino in Singapore, so an expansion into Australia makes sense.

Wynn Resorts in 2019 was involved in preliminary talks for a cash and scrip offer for Crown at $14.75 per share, which was later abandoned.

Wynn, founded by Steve Wynn who ran the business until 2018, has said it has an interest in Crown.

Elaine and Steve Wynn. Picture: Bruce Glikas/FilmMagic

While Crown’s Perth casino is considered a B-grade asset and its casino at Sydney’s Barangaroo is thought to be more boutique, its Melbourne casino is considered world class.

Wynn earlier offered assistance to Packer to gain a Macau casino licence, and the ties between the Wynns and the Packers go back to the days when Packer’s father Kerry would bet big in Las Vegas.

A deal would require regulatory approvals, including the Foreign Investment Review Board.

Blackstone’s strategy has been to move quickly and put pressure on Crown’s board and Packer to accept its proposal.

It remains in pole position to buy the asset with a stake in Crown of 9.99 per cent and is trying to gain regulatory approval.

 

But both Las Vegas Sands and Wynn have costs benefits and access to deep capital markets.

The natural advisers to the US groups for a counterbid are considered to be Goldman Sachs and Bank of America, with Goldman earlier said to be working with an offshore suitor considering a Crown bid.

DataRoom revealed on December 1 that Packer’s former key adviser, Matthew Grounds, had been hired by Star Entertainment for its play for Crown Resorts.

Grounds aided Packer when he worked at UBS but is now the executive chairman at Barrenjoey Capital Partners, working with The Star along with Credit Suisse. Packer is now working with Moelis.

 

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 some doubt it can mount a bid.

Analysts 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 firepower it needs to take on the private equity giant.

Still, most believe having Grounds in its corner offers clear evidence that a second proposal is on its way.