The Blackstone Group has upped its bid for troubled Crown Resorts, offering $6.2 billion for the embattled Australian casino giant. It’s the third try by the U.S.- based investment firm, and equates to AU$12.50 a share.
The new offer was disclosed by Crown on November 19, and propelled Crown shares 17 percent higher. But that was still short of Blackstone’s indicative price, and according to Reuters, suggests “a degree of doubt that a deal will eventuate.”
J.P. Morgan noted that the “market is clearly conscious of the potential conditions and risk given (that) the share price is trading well below the bid. … Crown (and/or special manager) is likely to reject this bid for various and differing reasons…valuation, regulatory or otherwise.”
Investors have been circling Crown for months due to licensing issues in every state where the company does business: New South Wales, Western Australia and Victoria. A series of reports by multiple Australian news agencies uncovered evidence of money laundering and a pattern of noncompliance at Crown casinos in Perth and Melbourne; an inquiry in those reports cost Crown its license to open a new casino in Sydney. And Covid-19 lockdowns have only exacerbated the company’s problems.
Rival Star Entertainment Group also made a play for Crown, but backed off when investigators found evidence of misconduct at its own operations. A Star spokesperson said the company “remains open to exploring potential value enhancing opportunities” with its chief competitor.
The largest casino operator in Australia, Crown has acknowledged to regulators in New South Wales and Victoria that it failed to prevent money laundering at its gaming halls. For a time it seemed Crown would lose its license in Victoria, but its importance as a local employer was in its favor. Regulators determined that the casino could continue to operate, under stricter supervision. Meanwhile, the company undertook a purge of executives and board members and has repeatedly pledged to put its house in order.
Steve Johnson, chief investment officer at Forager Funds Management, said it was “not surprising private equity is back at the table” after Crown was allowed to keep its Victorian license, but added that Blackstone’s offer appears to undervalue Crown. Previous offers came in at AU$11.85 per share and AU$12.35 per share.
Meanwhile, Crown is working with regulators in New South Wales to prove it is suitable to open the Crown Sydney casino. A Royal Commission into Crown Perth is due to hand down its judgment early next year.
According to Inside Asian Gaming, Blackstone’s latest proposal is subject to a range of conditions, including due diligence on Crown covering regulatory, commercial, operational, financial, taxation, legal and accounting matters, Blackstone receiving final approval from its investment committees, a unanimous Crown board recommendation and a commitment from all Crown directors to vote in favor of the proposal.
Blackstone is no stranger to the gaming industry, currently owning the real estate of the MGM Grand, Mandalay Bay and Bellagio in Las Vegas.
