The Blackstone Group bid on Crown Resorts is now in full motion as the firm decided to try its luck Monday with an AUD 8 billion unsolicited bid for the embattled casino operator!
The bid reported by the Financial Times (behind paywall) was roughly a 20% premium over where the stock was at the beginning of the year. Blackstone has been holding just below the 10% ownership threshold in Crown since last April, the stock is already trading as high as AUD 13, which would seem to indicate that many feel Blackstone’s bid of AUD 11.85 will not suffice. Crown says they have no view yet on the bid and have hired USB to oversee the proposal.
Still, it’s hard to believe that James Packer, who still has a 36% stake in Crown resorts, along with the rest of the board, can’t be feeling a bit relieved. They’ve spent over AUD 2 billion on a beautiful new casino on Sydney’s waterfront, only to be repaid with one of the most damning findings by a casino regulatory committee’s investigation in recent memory.
Money Laundering Acquisitions
In February of this year, an inquiry into long-term money laundering by Crown, their actively consorting with organized crime figures, and a company-wide disregard for regulation and oversight found that Crown Resorts shouldn’t be licensed in its current form for the casino at Barangaroo tower in Sydney.
It called for the dismissal of the entire executive team and strict safeguards to make sure that Mr. Packer who has supposedly stepped down from day-to-day operations, would not return “to what was clearly, a dysfunctional environment.” Probably the quote that sums up the entire situation the best was from the head of the ILGA, the body that would eventually have to license Crown should they be able to jump through the many hoops set by the inquiry.
Philip Crawford told reporters, “one of you had a headline last night about Crown needing to blow itself up to save itself. That’s probably pretty close to the mark”, and that is probably all one needs to know about Crown’s current predicament.
The report out of New South Wales almost immediately led to regulators calling for them to lose their license to operate in Melbourne and Perth as well.
Blackstone Group Bid On Crown Resorts An Opportunity to Move In!
Crown’s distress is another company’s opportunity, however, and Blackstone who has been on the prowl for acquisitions this year was already well-positioned to make a bid.
There had been rumours of Blackstone’s interest dating back to last summer, and as prospects dimmed for Crown both from Covid related developments, and the publicity surrounding the damaging media reports leaking out of the New South Wales inquiry, many speculated on a takeover bid. But as any poker fan will tell you, the opening bet is where it gets interesting.
With Crown Resorts stock trading as high as 10% over the offer by Blackstone, and share increases since the offer reported by the Sydney Morning Herald, there is obviously a belief that either Packer and his team will demand a much higher premium from Blackrock or that other bidders will enter the fray!
Wynn Resorts was in talks to buy Crown with an AUD 10 billion bid back in April 2019 but backed out over early disclosure of the terms. With the stock hammered by headwinds that left them with an 80% reduction in net profits for the 2020 fiscal year, plus a bright shiny 79 story casino tower ready to open and immediately start accruing to the bottom line once it’s licensed, and with this in mind, there is reason to believe that Crown can turn a weak hand into a much better payout if they play their cards right!