Steve McCann’s bet on Crown paid off handsomely, but former shareholders shouldn’t begrudge the casino boss for cashing out as the new private equity owners move in.
The former Lendlease and now ex-Crown chief executive is in line for a $9m windfall for his 13 months work and once free of his obligations in September he can return to hometown Sydney to focus on his horse racing interests via Vinery Stud.
But the payout, which included a $5.2m change of control clause, follows McCann agreeing to take on the job few global executives wanted. He signed on when the casino giant was at its weakest and in the teeth of emboldened regulators.
A little more than a year ago the business faced the real risk of being stripped of its operating licence after damning findings by three state-based gaming probes. It was also grappling with feared federal regulator Austrac. When he signed on there was no certainty the casino could stay together as a single business, let alone the opportunistic takeover approaches emerging would be acceptable to controlling shareholder James Packer.
The no-nonsense CEO delivered credibility and stability at the top. He then began the painstaking work of rebuilding governance needed to operate a casino of Crown’s size and turn it into a saleable property. That’s when global private equity major Blackstone struck with its $8.9bn deal.
McCann has said his aim at Crown was to “set a high standard” for casino governance and responsible gaming. And on Thursday he acknowledged he came into a role at a “challenging time”.
“I will leave Crown proud that we have made a positive impact on the future of this business,” the outgoing Crown CEO said.
Blackstone officially picked up the keys to Crown on June 15, with the US private equity giant now in charge of vast business from hotels to gaming and all of the additional regulatory scrutiny that comes with it. McCann kept his cards close to his chest during the takeover period but it is understandable that he cashed out. Blackstone too wanted to install its own management team, bringing in global casino heavyweight Ciaran Carruthers, the chief operating officer of Wynn Macau, as Crown chief executive.
Also drafted in as chairman is Bill McBeath who Blackstone relied on to turn around its Cosmopolitan casino in Las Vegas.
It’s an understatement to say the sector is going through a crisis of confidence. While tourism is slowly returning, casinos will have to generate more revenue from the domestic market rather than the free wheeling days of luring international whales. A much overdue regulatory catch-up is taking place, coming after extended Covid-19 shutdowns.
Casino crisis
In just three short years Crown has seen a board implosion, executive exodus and multiple management teams installed as well as the exit of the Packet name an ownership change.
Sydney-based rival Star Entertainment is still in the early stages of its crisis, with a separate NSW inquiry triggering the exit of its long serving CEO Matt Bekier and chairman John O’Neill. This week the South Australian government detailed plans for an inquiry of the Adelaide casino owned by New Zealand’s SkyCity.
The Crown management overhaul also marks the return to corporate life for John Borghetti who has been named as chairman of Crown Sydney. The former long serving Virgin boss has been quiet since he left the airline on a high in March 2019.
Just 12 months later the one time ambitious airline collapsed as its balance sheet buckled, unable to sustain the shock of a Covid shutdown across the sector. Despite doubts that Virgin could remain intact it was later sold to private equity player Bain Capital, representing one of Australia’s biggest administrations. Borghetti joined the Coca-Cola Amatil board when he was Virgin boss and stepped down following the takeover of the beverage group last year.
Chairman of Crown Sydney is a pivotal role for Blackstone. The city represents ground zero for the casino operator with the NSW regulator kicking off the process that started the humiliating unravelling for Crown. The $1bn Barangaroo complex, which has finally been granted a gaming licence, needs to start paying its way for Crown’s new owners and develop itself as a tourism destination.
New green bank
Private equity is flexing its green muscle, swooping in the face of sliding global markets to fund renewables tech play Xpansiv.
The raising confirms a $2bn valuation for the start-up and formally draws a line through what was shaping up to be one of biggest ASX floats this year.
Xpansiv, which has built up a platform to match businesses looking to buy and sell carbon offsets and renewable energy credits, earlier Thursday secured a $US400m ($590m) funding round from Blackstone, locking in the cash it had been eyeing from a possible ASX debut. The Blackstone talks were first reported by The Australian’s DataRoom column in May.
No one wants to light a fire in a rainstorm and the intense volatility around global markets – including deeply out of favour technology stocks – had threatened to put Xpansiv on the back foot from day one of trading on the ASX.
A listing in a downward market would have forced a young, capital-hungry company like Xpansiv to shift gears on its strategy, focusing on much shorter targets and aggressive cost milestones to keep investors on side.
Xpansiv, which also counts Commonwealth Bank, the Clean Energy Finance Corp and Macquarie as backers, was shaping up as one the biggest ASX listings of the year in a sparse field. It was seeking up to $600m, which would have valued the company at more than $2bn.
The bulk of Thursday’s investment came from Blackstone’s near $US5bn transition fund and continues the bigger trend of private equity emerging as the key financier for the global green shift. Remember it was another private equity fund Brookfield that proposed to put up the bulk of the capital to help billionaire Mike Cannon-Brookes attempt to buy out AGL and fast-track the power generator’s exit from coal.
Xapansiv earmarked the new funds to drive continued growth, with the green-tech company also eyeing acquisitions. Despite broader turmoil in markets Xpansiv founder Ben Stuart says the strategy hasn’t changed, rather it has just “pivoted” from one capital strategy to next.
“We’re extremely lucky to have a supportive partner in Blackstone that was there to help fund the activities that we’re looking to do and sees the trajectory of our market going in a very steep upward curve,” Stuart tells The Australian.
Even through the demanding process of a potential stock market listing and then to opt against a float, Xpansiv’s chief executive Joe Madden says it was still a positive experience. It gave him a broader sense of the support for the company and the strategy of the countless meetings with potential investors. The company for its part fits squarely into an ESG strategy that fund managers are looking for.
“We had the most positive interactions with the investors that we met across the board. I would say we had an incredible response,” Madden says.
“But the public markets are doing what public markets do right now. And I don’t think that in any way, shape or form was reflected in the conversations that we had about the overall fundamentals of the business or the sort of growth in the space broadly.”
Support from fund managers for businesses in the renewables space has evolved rapidly even over the space of two to three years. Most understand the sector, the technologies and the drivers and there’s a strong willingness to back it he says.
Blackstone says it is a committed long-term investor in Xpansiv. And this means the green tech business is now well capitalised while a number of players in the technology space are battling a falling equity market.
“What we see happening in any economic downturn is that many of the well-capitalised market leaders just come out of it stronger. We have no doubt that Xpansiv is going to continue to have market leading share,” says Blackstone’s senior managing director Bilal Khan.
“The price of conventional energy is skyrocketing and so the opportunity for renewable energy for voluntary carbon credits that satisfy the net zero targets that many companies have established, has never been better,” he says.
johnstone@theaustralian.com.au
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