At the beginning of January 2023, the Crown Resorts' board stated it may agree to a fourth, sweetened bid from Blackstone. The $8.87 billion proposal has since been laid out and Crown's board favoured it unanimously. While still pending approval from the gaming regulator and the Foreign Investment Review Board, the massive bid may be the final chapter in the battle for the acquisition of the country's leader in the gambling and entertainment industry.
Crown Resorts's Shareholders Will Enjoy Certainty of Value Thanks to the All-Cash Bid
As per the terms of the takeover, the international private equity group Blackstone will proceed to purchase all of Crown's listed shares at an agreed price of $13.10 per share. Crown’s chair Ziggy Switkowski stated the offer is subject to specific conditions. One of them is the lack of a new and better bid emerging from Blackstone's competitors in the battle for Crown Resorts. Switkowski added Blackstone's exclusive cash offers will provide its shareholders with “certainty of value”. Blackstone is one of Crown's shareholders with a 10% stake, while Consolidated Press Holdings owns 36.8% of the group's shares.
Chief executive Steve McCann says the new price per share is a good reflection of the group's premium services recognised worldwide, and that many real money casino players may also be familiar with, as well an expression of Crown's valuable assets. By accepting Blackstone's fourth bid proposal, the Crown Resorts brand is showing optimism in the bright future ahead of it, in the context of the challenging times that the group has been facing in recent years.
Blackstone's Previous Attempts Have Failed
At the end of 2021, Crown Resorts Limited rejected another bid from Blackstone Group. The investment management group that is based in the US then offered to buy out Crown for a massive amount. This was Blackstone's third attempt to seal the deal. However, Crown didn't find the new bid satisfying enough, especially in the light of other important companies actively expressing their interest in buying Crown Resorts through separate bids. This list includes Oaktree Capital Group and Star Entertainment.
Blackstone's third bid was set at $12.50, with a second smaller bid in May and a first proposed bid in March valued at $11.85 going through the same process of rejection. The fourth bid came at a time when the gambling giant which attracts millions of online pokies players every year, was faced with scrutiny over the results of investigations completed by the New South Wales Independent Liquor and Gaming Authority. Its inquiry was intense and damaging, with a final report issued by Commissioner Patricia Bergin bolstering the Victorian Commission's efforts. One of Blackstone's partial requirements for the deal to go through refers to Crown Resorts granting the US company exclusive access to all of its financials.
Star Entertainment Fought Back
Star Entertainment Group Ltd is another giant that expressed its interest in acquiring Crown Casinos. Star jumped into the bidding war for the giant in 2021 alongside Blackstone and Oaktree Capital Management. Star's third $12.50 bid was identical to Blackstone's third bid. However, Blackstone was quick to push the pedal to the medal and make a fourth sweetened proposal. Star has not made a counteroffer yet. Nonetheless, some analysts of the bidding war for Crown Casinos expect Star to get back into the battle and make a new bidding proposal to top Blackstone's latest offer.
Many investors considered Blackstone’s fresh proposed bid of $8.87 billion to be the winning one, while not taking into account any new bids from bidding rival Star Entertainment Group. The Blackstone potential acquisition is also supported by other big investors, including Crown bondholder TMS Capita's portfolio manager, Ben Clark. Clark also noted that Star Entertainment had proposed the two businesses would merge as part of a new deal, stating that while both Blackstone and The Star are still in the books, the Blackstone deal would have better odds given its cash bid. Star Entertainment representatives declared the company is still open to exploring “potential value-enhancing opportunities” with Crown Casinos.
Some Questions Remain
Some questions still remain regarding the way Blackstone would operate the Melbourne Casino provided the Victorian Government implements the 2021's findings of the Royal Commission. In October 2021, commissioner Ray Finkelstein decided to grant Crown Casino a two-year grace period to fix some of its ethical issues. His recommendations were backed by the government. One of them referred to the appointment of a special monitoring manager that would observe Crown Casinos' efforts to improve its flagship casino in Melbourne. The Melbourne casino is the country's largest Integrated Resort and a huge tourism driver with more than 19 million visits on a yearly basis.
Crown Melbourne Is Expected to Be Operated as Independent Property
The rest of Finkelstein's recommendations are expected to be completed sometime in 2023, and another important proposal refers to the Victoria casino's legislation being revised in such a way as to guarantee that the Crown Melbourne casino would be operated by independent executives in Victoria. As a way of ensuring the best deal for Victoria's economy, the gambling watch in the state has signed a commercial agreement with Crown Resorts according to which the flagship casino would be operated by independent and local executives. This would, in turn, enhance the effectiveness of the imposed regulations.
Crown Resorts' sale needs to receive the approval of the Victorian Gambling and Control Commission, the Independent Liquor and Gaming Authority in New South Wales, the Gaming and Wagering Commission of Western Australia, as well as the approval of James Packer, the largest shareholder who now owns around 37% of the Australian giant. While Packer's spokesperson has not made an official statement yet, there are plenty of indicators that Packer would not stand in the way of Blackstone's new proposal. Accordingly, he is expected to agree with the fourth negotiated bid which is 10.5% higher than its original proposal. Packer, who has already left the Crown's board as well as his own private investment company CPH Holdings, would be getting ready to scoop up $3.3 billion as part of the deal. As the biggest shareholder, his vote will be critical for the bid to reach the 75% threshold needed to receive approval.
By changing the structure of its ownership structure, Crown will be taking a first and critical step toward fixing most of its regulatory problems that emerged in recent years. The Blackstone takeover that is likely to change the shape of the Australian gambling industry should receive the final votes during a shareholder meeting that will be held in June 2023.
