$8BN takeover bid for Crown Resorts

New York-based private equity firm Blackstone Group Inc. has made an A$8.02 billion takeover offer for the beleaguered Crown Resorts Ltd.

Blackstone, which already owns 10% of Crown, has bid A$11.85 a share in cash to seize full ownership of the Australian casino operator.

If ever there was a time to make a play for Crown Resorts it is now.

However, a takeover is not without risk.

While Crown management has vowed to clean up its act leading to the resignation of Chief Executive Officer Ken Barton and five other directors, it is reeling from being found unfit to run its new Sydney casino.

Crown also still faces several inquiries by state-based regulators. These include two royal commissions, several class actions and an investigation by financial regulator AUSTRAC for potential breaches of Australia's anti-money laundering and counterterrorism financing laws.

Further to this, an investigation into Crown’s suitability to run its Melbourne casino will begin on Wednesday, with a separate investigation into its Perth operations to begin later in the year.

It is likely, however, that Blackstone has weighed these risks, despite the possibility that it could own a company barred from operating its three Australian casinos.

Certainly a takeover of this magnitude would benefit Blackstone long-term, adding considerably to its assets under management and its casino ownership.

It would also benefit Crown’s largest shareholder James Packer who has twice tried to exit the casino.

Blackstone has a history of casino takeovers

Blackstone currently manages $US619 billion ($800 billion) of assets globally, has been operating in Australia for 11 years and invested $14 billion in Australia and New Zealand.

It owns "The Cosmopolitan" in Las Vegas which it acquired in 2014 and in January 2020, agreed to acquire MGM Grand and Mandalay Bay.

Just last week, Blackstone teamed up with Starwood Capital Group and set in motion a $6 billion deal for hotel operator Extended Stay America Inc.

Blackstone’s offer of $11.85 for Crown is at a premium from the $8.15 per share it paid to Melco for its existing 9.99% of the company. Blackstone acquired its current Crown  shareholding during the initial wave of the COVID-19 pandemic.

Crown’s Board and shareholders will now meet to decide whether the bid is high enough.

In a statement to the ASX on Monday, Crown said it was assessing the merits of the offer, but was yet to form a view.

"There is no certainty that the proposal will result in a transaction," Crown stated.

Crown has now appointed UBS as financial adviser and Allens as legal adviser.

The bid is currently non-binding, meaning it is subject to several conditions, including ensuring the casino is deemed fit and proper to hold casino licences.

Blackstone is seeking unanimous approval from Crown’s board and permission from regulators to own and operate Crown’s casinos.

Notably, the bid sent Crown stock soaring 21% after crashing by almost half from a high of A$18 in early 2014. It is currently trading at $11.80.

Irit Jackson, 23rd March 2021