James Packer to come out ahead in $8.9b bid for Crown

James Packer will sell his longstanding family holding in Crown Resorts at a higher price than if he sold all of his shares in the ill-fated 2019 sale to Melco Resorts that kicked off three years of regulatory torment and investor agony.

Not only is Blackstone’s new and conditionally approved offer of $13.10 a share higher than the $13 price he sold a near 10 per cent stake in Crown to Melco for, the market is hopeful it will start a fresh bidding war for Crown after Star Entertainment and Oaktree Capital withdrew proposals last year.

If Mr Packer sold the 37 per cent stake held in his private company Consolidated Press Holdings (CPH) as part of the revised Blackstone deal, it would mean a $3.27 billion windfall.

CPH said it was encouraged by the offer and waiting for more developments.

“CPH will review all documents released to the market by Crown Resorts relating to a binding control transaction prior to making a decision regarding its shareholding,” a statement said.

“The assets of Crown Resorts are world class and this is reflected in the significant interest in the company.”

Crown is also expected to field more bids to rival Blackstone’s $8.9 billion takeover as talks with the private equity giant remain non-exclusive, despite the board’s conditional approval for the revised deal.

Further interest

JPMorgan analyst Don Carducci said that, because Blackstone had forged ahead with its higher $13.10 per share offer after a closer look at the casino operator’s books, it should alleviate fears of any materially unknown issues to the market.

He does not believe $13.10 will be the final price of Crown, which rose 8.1 per cent on Thursday to hit a six-month high of $12.58.

”Prior instances of CWN’s board not engaging has potentially discouraged other parties/suggested CWN was not interested in selling. This has now changed, and it is possible we see further interest,” Mr Carducci said.

A source in the Crown Resorts camp said there was no immediate sign of a rival bidder, but it was an option the company wanted to keep open given the good environment for M&A by keeping the Blackstone talks non-exclusive.

“Crown has decided to provide Blackstone with the opportunity to finalise its due-diligence inquiries and negotiate the terms of an implementation agreement, so that Blackstone can put forward a binding offer,” Crown said.

Star coy about position

The board’s final approval will also depend on an independent expert report concluding the takeover is in the best interests of Crown investors.

Still, Blackstone is confident it has done enough to get the deal – its third tilt at Crown in less than a year – over the line, and reckons it can sew it up by the end of June.

Star was coy about its position. The Sydney-based casino operator proposed a $12 billion merger with Crown, yet pulled this offer during the Victorian royal commission into its rival.

“The Star withdrew its conditional, non-binding indicative proposal to merge with Crown on July 23, 2021. As we have said consistently since that time, The Star remains open to exploring potential value-enhancing opportunities with Crown,” a spokesman said.

Oaktree Capital, which offered to buy Mr Packer out of his stake last year, declined to comment.

Crown’s third-largest shareholder, Perpetual Asset Management, welcomed the Blackstone offer.

“Perpetual looks forward to a binding transaction being executed and unless a superior proposal is presented, is in favour of the transaction,” head of equities Paul Skamvougeras said.

But investor VGI Partners said it did not think the bid valued Crown appropriately.

“We believe Crown’s assets are worth more than the revised Blackstone proposal, but we are pleased to see the Crown board engaging more actively with Blackstone,” partner Marco Anselmi said.

“Now that the board is granting full due diligence and recommending shareholders to vote in favour of the proposal, we could see more urgency from other parties interested in Crown.”

There has been intense scrutiny on the casino sector over the past two years, kicked off by the NSW review into Crown and media reports alleging Crown had partnered with organised-crime-linked junkets, had lax money laundering controls and disregarded the welfare of staff in China.

The NSW review substantiated much of the report. It declared Crown unfit to run a casino in the state and barred it from opening its new Barangaroo casino until it is deemed suitable.

This sparked inquiries into Crown’s activities in Victoria and Western Australia. The Victorian royal commission also found it unfit to run a casino but allowed Crown to continue operating

The NSW Independent Liquor and Gaming Authority is also running the ruler over Star Entertainment and its relationship with controversial junket operators, with public hearings as part of this review set to start this year.