On August 30, the last of a trio of proposed deals with Crown Resorts fell apart, ending the M&A activity that’s swirled around the Australian casino operator for much of the year.
In April, U.S.-based investment group Oaktree Capital Management offered to underwrite a multibillion-dollar buyback of James Packer’s stake in the beleaguered company. In May, Star Entertainment proposed a merger of the two operators, a plan that would have created a casino behemoth in the country. In June, U.S.-based Blackstone Group proposed to buy the scandal-ridden Australian casino giant for US$6.2 billion.
According to Inside Asian Gaming, all three companies likely sensed “an opportunity to pounce” on Crown, whose gaming licenses hang in the balance due to money laundering, tax evasion and a seeming indifference to regulatory mandates in three states: New South Wales, Victoria and Western Australia.
None of the deals got much traction. In May, Crown rejected the Blackstone bid. In July, Star reconsidered its own proposal and walked away, saying issues raised at Victoria’s Royal Commission “have the potential to materially impact the value of Crown, including whether it retains the license to operate its Melbourne casino or the conditions under which the license is retained.”
And last week, the third proposal came to an end. Oaktree had offered A$3.1 billion (US$2.3 billion) so Crown could buy out Packer, who holds a controlling 37 percent stake in the company and is seen by most as the architect of its problems. After the initial probe in New South Wales, Crown was denied a license to open its new casino in Sydney. That venue remains closed until Crown can demonstrate its suitability as a corporate citizen.
To that end, the company continues a top-down overhaul of its executive tier. On August 27, Executive Chairwoman Helen Coonan officially stepped down from the board to be succeeded by veteran telecom executive Ziggy Switkowski. Non-Executive Director Jane Halton will act as interim chair until Switkowski is approved by regulators.
Crown described Switkowski as one of Australia’s most experienced corporate leaders, having held roles as chairman and non-executive director of ASX-listed companies and national organizations following an executive career which included CEO appointments at Telstra and Optus. Based in Melbourne, he is currently non-executive chairman of NBN Co. and chancellor of RMIT University.
“It has been a privilege to serve on the Crown board and more recently as executive chairman driving a transformation of the culture, governance and compliance of what is a unique Australian company,” said Coonan, who took the position in March following the departure of CEO Ken Barton.
“My aim has been to stabilize and strengthen the business following the recommendations of the Bergin inquiry and set Crown on the reform path now being embedded across our world-class assets in Melbourne, Perth and Sydney,” she said. Coonan said the company “is firmly on a pathway to rebuild trust and positioned for success over the long term.”
Switkowski said, “I look forward to joining the crown board and working with board colleagues, CEO Steve McCann and Crown employees to grow value for shareholders by continuing the urgent work to reform the business.”
The Sydney Morning Herald called Switkowski “a very interesting grenade” who might not see eye to eye with Crown’s new chief executive.
“McCann’s agenda appears to be very focused on holding the Crown ship together and finding a path back to license suitability,” the publication said. Switkowski, on the other hand, is a “dealmaker” who “won’t be sitting around for the next five years waiting for things to evolve at Crown, nor will he be sentimental about the history surrounding the Packer family’s creation of a gaming empire.”
The Herald noted that Crown’s fate, at least in the short term, lies with Ray Finkelstein, head of the Victorian Royal Commission. It’s Finkelstein who will make recommendations in October on whether Crown should lose or keep its license in that state, and what conditions will be attached.
In a rare bit of positive news, Crown has reached an agreement with creditors to extend the maturity of A$560 million in bilateral facilities to October 2023. The lenders also agreed to waive certain financial covenants until December 31, 2021.
And Star CEO Matt Bekier says that company may revisit a merger pending the outcome of the commissions in Victoria and Western Australia.
