Crown Receives AU$6.2B Buyout Offer from Blackstone Group

Troubled Australian casino operator Crown Resorts received a buyout offer from Blackstone Group Inc, the company revealed Monday declining to comment further on the unofficial bid.

Price Discovery

Crown’s second-largest shareholder Blackstone offered AU$11.85 per share bringing the total valuation to AU6.2 billion, but when the news hit the wires Crown’s shares jumped more than 20% to surpass the proposed valuation.

The market reaction was an indication that the informal offer was an attempt at price discovery and would stir into action other potential suitors, and if a deal is to be struck with either the investment fund or any other interested party, it would be at a higher price.

Holder of 9.99% stake in Crown Blackstone boasts an impressive portfolio of gambling-related businesses spanning from Las Vegas to Spain and if the bid is to succeed, the investment fund will add casino resorts in 3 Australian cities.

The touted amount was less than what Crown could have fetched a year ago, but since then it faced strong headwinds from environmental and regulatory forces. First, it was the coronavirus outbreak that severely impacted the gambling industry worldwide, including Crown Resorts, and second, it was the outcome of the inquiry in New South Wales (NSW) related to Crown’s suitability to hold a casino license.

Regulatory Woes

Last month, the Independent Liquor and Gaming Authority (ILGA) in NSW dealt a significant blow to Crown’s business plans after finding the operator unsuitable to hold a casino license for its new AU$2.2 billion casino resort in Barangaroo.

Following the final inquiry report submitted to the NSW Parliament by former Supreme Court Judge Patricia Bergin, the regulator allowed Crown Resorts to open only the non-gambling parts of its new casino property, after initially asking the operator to delay plans to open the resort.

Meanwhile, more clouds gathered above the head of Crown Resorts after the other two Australian states in which the casino company has gambling properties launched probes into its operations. Last month, the government in Victoria set up a commission to investigate Crown’s suitability to hold a casino license and operate Crown Melbourne, following on its initial position to not take disciplinary action prior to the NSW final report.

Prior to that, the financial crimes authority, the Australian Transaction Reports and Analysis Centre (AUSTRAC), subjected the company to an investigation regarding its handling of high net worth individuals (HNWIs) and politically exposed persons (PEPs).

In addition, Crown is facing civil class action lawsuits alleging investor losses due to corporate governance and risk management failures which led to a significant slump in share price which appeared after news that AUSTRAC discovered anti-money laundering (AML) non-compliance at Crown Melbourne.

Crown Resorts noted its board has yet to form a view on the informal bid from Blackstone but would discuss it with relevant stakeholders, among which holder of 36% James Packer, as well as regulators.

Packer, who faced significant pressure from the NSW inquiry recommendations to sell his stake, also refused to comment on the proposal which would value his shares at AU$2.9 billion. Blackstone also declined to comment beyond a formal confirmation of the offer.

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