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Australian Crown Resorts Backs $6.3 billion Blackstone Bid
By Shane Addinall Feb 18, 2022 IndustryCrown Resorts, once synonymous with the Australian Packer dynasty, accepted an offer from the US equity company Blackstone Inc. At AUD13.10 per share, it seems Blackstone undervalued the company, but shareholders believe it is a fair deal.The Australian gaming industry may soon bid farewell to a Packer-led Crown Resorts. Nearly one year after Blackstone Inc first approached Crown, the troubled Aussie operator agreed to an AUD8.9 billion takeover deal. The finalisation of the deal will be the end of the James Packer era and the billionaire gets a clean exit.
Blackstone Inc is a private equity company, based in the United States, and the accepted offer was their third counter offer for Crown Ltd. Other suitors knocked on the bid table regardless of Crown’s precarious regulatory issues but did not make the cut.
Crown Resorts Chair, Ziggy Switkowski, commented that although the deal undervalues Crown Resorts, Blackstone’s all-cash deal provides much-needed certainty to the shareholders.
Saved By the Bid
Describing the past few years as ‘trying’ for Crown Resorts would be grossly understating the company’s problems. Apart from the shared industry blow related to Covid-19 lockdowns, the casino operator faces regulatory suspension and scandals of criminal activity.
While the winning bid comes from Crown’s current 10% stakeholder, Blackstone faces more than standard M&A red tape with this deal. Regulatory scrutiny arose following investigations that revealed Crown’s ties with criminal organisations and the company tried to pull the wool over authorities’ eyes regarding their dealings.
As a result, the country’s regulator sanctioned the closure of Crown’s AUD2,2 billion flagship casino in Sydney and cancelled its trading licence. Deemed unfit to run the gambling business from the Sydney skyscraper, the facility remains closed a year after it should have opened. Due to allegations of tax evasion and money laundering, their biggest earning casino in Melbourne operates under a supervisor appointed by the government. Switkowski said:
“The Crown board and management have made good progress in addressing a number of significant challenges. Nevertheless, uncertainty remains and having regard to those circumstances and the underlying value of Crown, we believe the Blackstone transaction represents an attractive outcome for shareholders.”
The next steps in the process include approval from government boards and regulators, while a final vote in June will seal the deal.
Sharpen Those Pencils
Despite their troubling situation, Crown Resorts seem anything but eager to sell. Blackstone approached Crown Resorts in March 2021 with an offer of AUD11.85 per share, which the operator rejected. Blackstone’s counteroffer in May also made no impression on the board. Subsequently, other interested parties joined the bidding process.
Crown declined a merger proposal from their Aussie rival, Star Entertainment Group, and a bid on James Packer’s stake from Oaktree Capital Management. Blackstone’s last offer for AUD13.10 per share, caught the shareholders’ attention after the equity firm raised their third bid of AUD12.50 with 5%. Bringing the buyout to a value of AUD8.9 billion ($6.36 billion). Although this is slightly below the company’s worth before pandemic and regulatory issues in 2019, members believe it is reasonable.
When asked whether the company’s decision factored in post-covid trading and intense regulatory scrutiny, Chief Executive Steve McCann told analysts:
“When you are looking at a change of control, it’s not today’s trading price and today’s earnings. It’s a much broader assessment. This is a pretty fair price.”
Crown’s market value on Monday was AUD12.65. A 2% bump following the news of the final offer from Blackstone.
Majority Rule
Company founder, James Packer, stepped back from his duties and quit the board some time ago, but the billionaire still holds more than a third of the company’s shares. His agreement in the deal is essential for a 75% majority shareholder vote, come June 2022.
Considering the challenging decade his company faced, and that he walks away with AUD3,3 billion, we can’t imagine another ending to the Packer dynasty chapter.
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