Persistence has paid off for U.S. private equity giant Blackstone Inc.. On its fourth try, Blackstone finally made a successful bid to take over Australian casino giant Crown Resorts. The embattled gaming firm has faced pressure from three Australian state governments over failures to stem money laundering, plus tax evasion and other regulatory breaches.
Blackstone first approached Crown in March 2021 with an offer of AU$11.85. It was rejected as too low, as was a new offer that May. In July, rival operator Star Entertainment Group proposed a merger with Crown, but backed off when it faced similar allegations of malfeasance. An offer from Oaktree Capital Management also went nowhere.
In its final bid, Blackstone offered AU$8.9 billion (US$6.4 billion), which met with approval from the Crown board. In a February 14 filing, members unanimously approved the offer “in the absence of a superior proposal.”
If the deal goes through, Australian billionaire and primary shareholder James Packer will pocket $3.26 billion, and stockholders will be entitled to AU13.10 in cash per share.
Recently appointed Crown CEO Steve McCann said he recommends shareholders accept Blackstone’s cash because it’s a “compelling offer … The price appropriately reflects the value of Crown’s world-class assets and a global reputation for premium service and experiences.”
Crown Chairman Ziggy Switkowski agreed that Blackstone‘s all-cash offer “provides shareholders with certainty of value.”
Sources close to Packer told the Sydney Morning Herald he was “relieved the deal was progressing” and would likely cast his shareholding in its favor. Packer owns 37 percent of Australia’s largest casino company, but stepped back from an active role several years ago due to mental health issues.
In 2019, a series of reports by The Age and the Herald revealed evidence of criminal infiltration, money laundering, tax evasion and an irresponsible approach to gambling harms at Crown casinos.
Royal commissions in New South Wales and Victoria found the company unfit to hold licenses in those states, while a commission in Western Australia is due to report its findings next month. Despite those damning conclusions, Crown was given an opportunity to right the wrongs, in part because it is one of the largest employers in the states where it does business. The hope is that a Blackstone takeover will begin a new era at Crown.
“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,” said Chris Tynan, senior managing director and head of real estate at Blackstone Australia in a statement.
The takeover will also allow Crown’s new board and management, including recently appointed CEO Steve McCann and Chairman Ziggy Switkowski, to rebuild what McCann called Crown’s “social license.”
Switkowski added that “uncertainty remains” for Crown Resorts, but “the underlying value of Crown we believe the Blackstone transaction represents an attractive outcome for shareholders.”
Sanjhi Awaaz, a Punjabi radio station in Melbourne, reported that Packer is not the only big winner from the Crown sale. McCann, former head of property giant Lendlease, “ensured there were suitable safeguards to protect him if a takeover occurred when he signed on for the challenging and high-risk role in June last year,” the news outlet reported. Depending on how quickly the deal closes, McCann could receive millions of dollars in compensation, less than a year after he joined the company.
Blackstone has other casino industry assets, including the Bellagio, the MGM Grand and until recently Cosmopolitan casinos in Las Vegas. It also owns the Spanish group Cirsa, with 147 casinos in Spain, Morocco and Latin America. Blackstone is already Crown’s second biggest shareholder, with a 9.9 percent stake.
The New Daily suggested that the takeover could radically reduce scrutiny of Crown, and activist shareholder Stephen Mayne says the deal should be blocked. “I don’t think it’s appropriate for a foreign private equity giant to own a business as sensitive as Crown after all the scandals that have happened,” he said. “That would be a massive loss of transparency with no stock exchange announcements, no annual meetings, and no 60,000 shareholders.”
Antigambling activist Tim Costello is displeased for the same reasons. “If it becomes owned by a private equity company, I won’t be able to go and ask questions,” he said.
But it wouldn’t mean Crown is off the hook for its misdeeds. Victorian Gaming Minister Melissa Horne said a sale of Crown would not affect how that government addressed the recommendations from last year’s royal commission, which includes the appointment of a “special manager” to oversee its reform over the next two years.
“Any potential change in ownership does not change that we will acquit all the recommendations of the royal commission, with further legislation to be introduced this year,” Horne said.
Costello added, “We heard story after story of abuse inflicted by Crown. Just because the casino has changed hands doesn’t mean Blackstone can forget past sins.”
The proposed deal must be approved by gambling regulators in all three states where Crown is active. It will go to a shareholders’ vote sometime between April and June. A second-quarter meeting is tentatively scheduled for April 29.
