Packer’s Crown era ends as US giant Blackstone takes reins

US private equity giant Blackstone has pledged to commit significant capital to rebuild Crown Resorts after completing its buyout of the Packer family’s stricken casino empire for $8.9 billion on Friday.

Crown Resorts ended its 15 years on the ASX boards on Friday afternoon, book-ending one of the biggest corporate scandals in Australian history with a $3.26 billion golden parachute for major shareholder James Packer.

Chris Tynan, Blackstone’s head of real estate, said the private equity firm’s buyout of Crown was its biggest transaction in the Asia-Pacific, and it would sit down with management to nut out an investment plan for its flagship Melbourne casino.

“This is a great opportunity that plays to Blackstone’s strengths – investing significant capital and resources to rebuild Crown into an iconic

destination for travel and leisure that everyone can be proud of,” he said.

Blackstone has also appointed a new chairman, Bill McBeath, who used to run The Cosmopolitan in Vegas for the private equity giant.

The stricken group has been in turmoil since mid-2019, when The Age, Sydney Morning Herald and 60 Minutes revealed it had been doing business with high roller junket operators while having inadequate controls for the prevention of money laundering.

That triggered three separate state inquiries that questioned Mr Packer’s influence over Crown’s operations and found Crown unfit to hold its casino licences in Sydney, Melbourne and Perth. Each state ultimately let Crown keep its licences under probation, an arrangement Blackstone has inherited.

Mr Tynan pledged to work with management, employees and unions to “continue Crown’s transformation to operate at the highest standards of compliance, governance, and integrity.”

The casino group’s final trading day on the ASX comes just two days after Crown and Blackstone were granted a provisional permit to open the gaming floors atop the $2.3 billion Barangaroo Tower on Sydney’s Darling Harbour.

Blackstone said it still did not have a firm opening date for the casino, which was originally planned as a high roller-only salon with a focus on overseas VIPs.

Crown shifted directions amid tough scrutiny on problematic high roller junket operators from gaming and anti-money laundering authorities that are concerned about their links to organised crime in Asia. The Barangaroo casino is still membership-only, but local punters of any status can apply as long as they can prove the source of their funds and pass other background checks.

Mr Packer’s multibillion-dollar payday from the sale of his 37 per cent stake in Crown Resorts comes almost 18 months after the NSW regulator banned the company from opening the Sydney casino following an explosive inquiry in late 2020.

Mr Packer had gone to great lengths to secure the Sydney licence, pitching the casino project to the then-NSW premier Barry O’Farrell at a lunch at former radio shock-jock Alan Jones’ apartment, and securing the deal without a public tender.

To the employees, management and the board of Crown Resorts, past and present, it’s been an incredible honour to work with you and I will always look fondly on what we created together, particularly Crown Sydney,” Mr Packer said after the buyout ended Crown’s tenure on the ASX on Friday.

“There have been ups and downs and challenges, but today’s final sale to Blackstone, is confirmation that we have built one of the country’s best tourism, entertainment and leisure companies, and I am extremely proud of that, thank you to everyone at Crown.”

The reclusive billionaire had been looking to offload his stake, and was facing extra pressure to find a buyer after Victoria’s royal commission into the casino last year ordered him to exit his stake by September 2024 to address his outsized influence over the company.

Crown cleaned out its board and senior executives and spent millions of dollars on new corporate governance systems as part of its plea to NSW, Victorian and West Australian regulators that it was capable of reform and should be allowed to hang onto its licences in each state.

Controversially, the Australian Securities and Investments Commission (ASIC) ruled out investigating directors and executives responsible for the company.

James Packer is finally exiting his dream development - the Barangaroo casino, hotel and apartment complex.

A federal politician, and an anti-gambling activist and investor, expressed dismay that the Crown scandal ended without the corporate watchdog launching an investigation.

“ It was a dodgy company, characterised by the most odious systemic and cultural misconduct. Nothing was out of bounds there,” said independent federal politician Andrew Wilkie, who was instrumental in revealing damning information about Crown’s Melbourne casino.

Long-time Crown watcher and investor Stephen Mayne asked: “Where is the individual accountability for corporate malfeasance?” he asked.

Geoffrey Watson, SC, a director of the Centre for Public Integrity and former NSW anti-corruption prosecutor, said the sale of Sydney land to build Barangaroo should have attracted more scrutiny. “It seems to me that this is the perfect ye olde Sydney town arrangement ... And we all let it go as though there is no way of stopping it,” the Sydney silk said.

Conditions were ripe for private equity to pounce on the scandal-riddled group that attracted conditional offers from US private equity groups Oaktree and Apollo.

Blackstone eventually lassoed the company in February with an all-cash bid after raising its bid three times from an initial $11.85 a share offer in March last year, before increasing to $12.35 and $12.50.

It took a fourth offer of $13.10 to bag the coveted - but still unopened - casino in Sydney, the sprawling Melbourne Southbank complex and smaller Perth casino facility.

The final offer was finally accepted by the board in February and Mr Packer, who owned his company stake via his private investment vehicle, Consolidated Press Holdings (CPH), and the remaining shareholders overwhelmingly voted for the deal in May.

The Blackstone bid is just over the $13 a share Mr Packer was willing to accept for almost half of his stock in May 2019 from Melco, the Hong Kong outfit backed by Laurence Ho. That offer, which sparked the NSW Bergin Inquiry that found Crown unfit to open its Sydney casino unless it underwent reforms, was significantly lower than the $14.75 offered by US casino rival Wynn Resorts in April 2019.

Wynn abandoned its takeover bid for the company within days of the Street Talk column revealing its negotiations with Crown and Mr Packer.

Governance expert Helen Bird warned the privitisation of the company would require regulators to step up surveillance, especially after the two-year probation periods ends because publicly available information will be difficult to access now that it is in private hands.

Mr Tynan sought to allay fears, pointing to Blackstone’s ownership of a portfolio of casinos in the US including, the Cosmo Casino in Las Vegas, to show the group was very familiar with the investment needed to ensure its Australian casinos stay within the law.

“We have regulated investments all around the world ... So it’s a bar that we are familiar with. And it’s not a bar that we want to jump near to. We want to be clearing that bar, always. And that’s our commitment to the regulators,” he said.

Crown chief executive Steve McCann said the biggest opportunity for the new owners is to continue the remediation work needed to retain its casino licences in Sydney, Melbourne and Perth.

“I think we can’t afford to be complacent and say ′ job done completely’. I think the job is well and truly underway. But it’s never, never really done” he said of the massive overhaul of the group after every jurisdiction it operates in found it unsuitable to hold a licence following inquiries into its conduct.