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Blackstone Bids €5 Billion to Acquire Crown Resorts Australia
By Shane Addinall Mar 22, 2021 IndustryAfter a rough year for Crown Resorts Australia, a buy out by Blackstone could be the exit strategy James Packer needs. Will the bid be accepted or will unexpected challengers arise to place a bigger and better bid?The casino industry around the world has been hit in the worst possible ways throughout the last year. The Covid-19 pandemic has proven to be a tough obstacle to overcome.
More than just dealing with the current pandemic and the effects of lockdown, Crown Resorts in Australia is struggling more than most.
Due to events that have taken place over the last few years, the casino resort is facing a dropping stock value and an inquiry from the New South Wales Independent Liquor & Gaming Authority.
In the face of damaging business allegations, a pandemic, and the recent inquiry, Crown Resorts’ saving grace may be a possible buy out.
Blackstone’s €5 Billion Bid
After acquiring a stake of 9.9% in Crown Resorts from Asian gaming giant Melco Resorts & Entertainment Limited in April 2020, the private equity group is ready for more.
Based in New York, Blackstone specialises in alternative investments. The company has placed a bit to buy out the remaining 90% of Crown Resorts for Aus$11.85 per share. Once the bid was placed, Crown’s stock soared to A$11.97 per share.
Nathan Bell, the portfolio manager for Intelligent Investor (which has Crown Resorts shares) commented on the bid by Blackstone and the price they offered.
“Blackstone couldn’t get away with a price like this if the casinos weren’t being affected by COVID and the management issues at the same time. It’s only an opening bid. It’s a messy situation and offering to acquire a casino is a complex affair at the best of times due to all the regulation.”
The bid has many conditions that must be fulfilled including due diligence, arranging debt finance, and the full support from the Crown board. It would also require commitment from all Crown directors to back the purchase and proposal.
Lastly, Blackstone would need to prove that they are of the highest moral standard to receive approval from NSW, Victorian and WA regulators.
A Long List of Transgressions
As we’ve already mentioned, Crown Resorts has faced a lot of issues over the last few years.
After 19 staff members were arrested in China for allegedly breaking Chinese laws against soliciting gamblers, the stock value for Crown Resorts halved overnight.
James Packer, the billionaire who started Crown Resorts, soon sought to sell off 20% of his shares to Melco Resorts. They agreed to purchase only 9.9% (which Blackstone now owns) before rejecting the other half of the shares. This was yet again another hard knock for the company.
Shortly thereafter, the Covid-19 pandemic hit Australian shores and resulted in a massive loss in revenue. The extended closure of land-based casinos, public gathering places, and even restaurants have resulted in an even further decline in Crown’s income.
James Packer has stated that he has severe mental health issues and even checked himself into a private clinic in the United States. In order to get the Crown Resorts off of his hands, it wouldn’t be a surprise if he pushed the sale to Blackstone through as far as he possibly can.
This sale could be the exit plan Packer needs to pass Crown Resorts on to another company that is better equipped at ensuring that it flourishes.
For now, there is no word on whether or not the Crown board will accept Blackstone’s offer. There is also talk of possible further bids from US casino group Wynn Resorts and Crown’s rival The Star Entertainment Group.
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