The Crown Resorts casino empire controlled by James Packer for nearly two decades is moving closer to new ownership with the company’s board, its billionaire major shareholder and other major investors indicating their likely support of an $8.9 billion takeover bid from US private equity giant Blackstone.
Crown’s board said on Thursday it intended to recommend shareholders accept Blackstone’s latest takeover offer of $13.10 a share, which valued Mr Packer’s near 37 per cent stake at $3.26 billion and could provide a pathway for him to sell down his stake to appease regulators in NSW and Victoria.
Any takeover by the New York-based Blackstone, which already owns 9.99 per cent of Crown, is expected to face intense scrutiny from gambling regulators in NSW, Victoria and Western Australia, which over the past two years have considered cancelling Crown’s casino licences for its Barangaroo, Melbourne and Burswood casinos over a string of legal and ethical breaches including its infiltration by criminal syndicates.
Crown said it intends to accept the higher offer from Blackstone. Credit: The Age
Crown’s Ziggy Switkowski-led board has also left the door open for rival bidders, with Crown’s Sydney-based rival The Star Entertainment Group saying it is still interested in merging the two groups.
A sale to Blackstone – which is subject to further due diligence by the US group and negotiating final terms – will require the support of 75 per cent of shareholders, leaving the fate of the company squarely in the hands of the reclusive Mr Packer, who has been looking to offload his stake for several years.
The one-time executive chairman of Crown stepped back from a direct role running the company three years ago amid mental health issues, and no longer has any representation on Crown’s board after a NSW public inquiry found in early 2021 that his influence distorted the company’s corporate governance with “disastrous consequences”.
Mr Packer’s private company, Consolidated Press Holdings (CPH), said in a statement that it was “encouraged by today’s announcement and awaits further developments”.
“CPH will review all documents released to the market by Crown Resorts relating to a binding control transaction prior to making a decision regarding its shareholding,” the statement said.
“The assets of Crown Resorts are world class and this is reflected in the significant interest in the company.” Another major shareholder Perpetual which owns a 9 per cent stake in Crown also indicated it would support the offer.
Mr Packer agreed to sell a 19.9 per cent stake in Crown to Hong Kong’s Melco Resorts for $13 per share in 2019, fuelling expectations Blackstone’s higher offer of $13.10 will be attractive. Mr Packer is facing additional pressure to offload his shares, after Victoria’s royal commission into Crown last year recommended he be ordered to sell down his stake to below 5 per cent by September 2024.
The NSW Independent Liquor & Gaming Authority said it was still assessing Blackstone’s probity, including examining its existing casinos in Las Vegas and Latin America, after it applied last year to increase its stake in Crown.
The authority suspended Crown’s casino licence for its new $2.2 billion tower at Sydney’s Barangaroo in late 2020, and it is unclear whether a change in ownership would delay its reinstatement, which Crown has said it expects early this year.
“The Authority is continuing its consideration of Crown’s remediation action and suitability to hold the licence,” an ILGA spokeswoman said.
The market cheered the higher offer, sending Crown shares 8.77 per cent higher on the news to close at $12.65.
Crown gave Blackstone an initial look at its books in December and said it would now grant it full due diligence and start negotiating sale terms so it could put forward a binding offer.
The company said that if Blackstone makes a binding offer at $13.10 or more, then “it is the Crown Board’s current unanimous intention to recommend that shareholders vote in favour of the proposal in the absence of a superior proposal”.
Thursday’s development throws down the gauntlet to Crown’s Sydney-based rival The Star Entertainment Group, which in May last year proposed a $12 billion merger between the two ASX-listed groups, which said on Thursday it “remains open to exploring potential value-enhancing opportunities with Crown”.
The Star withdrew its merger offer as Crown’s licences for its Melbourne and Perth casinos came under threat from royal commissions that examined criminal activity by its customers and other malpractice, but it has said it is still interested in combining the two casino outfits. Star is now the subject of an inquiry by the NSW gaming regulator following allegations of similar governance breaches.
A Victorian royal commission into Crown’s Melbourne casino found in October last year that the company was unfit to run its flagship property after examining a “disgraceful” litany of legal and ethical breaches, but decided not to recommend cancelling its licence, and instead gave it two years to reform itself.
The newly formed Victorian Gambling and Casino Control Commission was contacted for comment about how a change of ownership would affect the Crown Melbourne licence but did not respond by deadline. Western Australia’s royal commission is set to report its findings in March.
Crown’s regulatory woes were sparked by a series of reports by The Age and Sydney Morning Herald in mid-2019 that exposed the group’s infiltration by international criminal syndicates.
More than two years of rolling scandals and regulatory scrutiny has triggered an almost complete clean-out of senior management and directors at Crown. Former Lendlease boss Steven McCann was appointed CEO in May last year and former Telstra boss Mr Switkowski joined as chairman in December.