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Crown Resorts board agrees to Blackstone’s buyout offer of $8.9BN
Crown Resorts has agreed to sell its Melbourne, Sydney and Perth casinos to US private equity group Blackstone, with the Crown board backing the $8.9 billion takeover on Monday.
However, the deal is subject to regulatory approval in three states and a casino license can only be granted after the regulator examines the binding offer from Blackstone.
If the deal goes through, Crown Resorts would be delisted from the Australian Securities Exchange (ASX), but the company’s largest shareholder James packer would pocket a tidy $3.3 billion.
The Crown board agreed to the deal after rejecting Blackstone’s first bid of $11.85 a share in March last year.
The bid has been revised twice since then, but the final offer adds $845 million to Blackstone’s initial offer.
While Crown’s share price peaked at $12.76 on Monday after the announcement, it pared back to $12.64 to close just 2% higher than its intraday starting point.
Investors may still be spooked by regulatory uncertainty surrounding Crown.
Regulatory and shareholder approval is still required for the deal to go through.
Forager Funds Management chief investment officer Steve Johnson believes Crown is worth more delisted, especially after the NSW, Victorian and WA inquiries and the fall of international high-roller revenue due to COVID-19.
“Crown remains a high-quality and valuable asset and is worth more to private equity than it is ever going to be worth listed on the ASX. They can use more leverage and financial engineering and they don’t have an (environmental, social and governance) discount applied,” Mr Johnson said in a note to investors.
S&P Global Ratings analysts believe the deal “heightened negative pressure” on the company’s credit rating.
“The offer, which is subject to a number of regulatory and other hurdles, could adversely affect the Australia-based gaming and entertainment group’s (BBB/Negative/A-2) credit quality, depending on the financing strategy employed by Blackstone,” wrote analysts Craig Parker and Paul Draffin. “The Blackstone bid has introduced further uncertainty to Crown’s long-term business composition and financial position.
“Among the downside risks to Crown’s credit quality over the next two years are regulatory risks associated with the group’s gaming licences. The group also continues to face Covid-related disruptions and exposure to potential regulatory fines and sanctions arising from various regulatory reviews currently under way.”
A royal commission into Victorian operations recommended Packer sell down his 37 per cent controlling stake in Crown to 5 per cent within two years.
This would suit Packer as the price is 10c higher than a failed deal with Macau billionaire, Lawrence Ho, who agreed to pay $13 for a 19.99 per cent holding of Crown in May 2019.
Crown chairman Ziggy Switkowski has lauded the acquisition.
“The Blackstone transaction represents an attractive outcome for shareholders.
“The Crown board and management have made good progress in addressing a number of significant challenges and issues emerging from the Covid-19 pandemic and various regulatory processes,” he said.
“Nevertheless, uncertainty remains, having regard to those circumstances and the underlying value of Crown.
“The all-cash offer provides shareholders with certainty of value.”
Blackstone’s private equity division has $US120 billion ($165bn) in assets under management and another $US30 billion ready to invest, with investments including Las Vegas’s MGM Grand/Mandalay Bay, which it bought for $US4.6 billion in 2020 and the Bellagio casino, which it bought for $US4.25 billion in 2019.
Blackstone believes Crown’s non-gaming assets – including hotels, restaurants and high-end shops – will help revitalise Sydney and Melbourne’s CBDs.
“Crown plays a pivotal role in Australia’s economy through job creation, investment and as a tourism destination for locals and visitors alike,” Blackstone’s head of real estate, Australia, Chris Tynan said. “We are excited to bring our local expertise and global hospitality and gaming experience to contribute to Australia’s post-pandemic recovery and position Crown for future growth.”
Irit Jackson, 15th February 2022
