(Bloomberg) – Blackstone Group Inc. offers to Crown Resorts Ltd. for sale in an A $ 8.02 billion ($ 6.2 billion) deal, which falls on the troubled Australian casino operator while he is being assaulted by local regulators.
The private company in New York, which already owns 10% of Crown, offered A $ 11.85 per share in the rest of the company, Crown said on Monday. Crown appraised the proposal and its share rose 21% to A $ 11.97 at the close of trading in Sydney, indicating that investors are expecting a higher bid or a competitor.
Crown was found unfit to run its new casino in Sydney last month after years of money laundering at other properties, and is being investigated for its suitability to own casinos in Melbourne and Perth. But if Crown’s planned corporate makeup regulators can appease, the price for Blackstone is clear: casino monopolies in two Australian cities and a shiny A $ 2.2 billion resort on Sydney’s beach.
With a decades-long history of hotel and gambling investments, Blackstone is now doubling down on one of the industries that hit the pandemic the hardest – just as vaccines are fueling hopes for a travel and leisure recovery. Last week, Blackstone partnered with Starwood Capital Group to sign a $ 6 billion deal for hotel operator Extended Stay America Inc. closed. In 2019, Blackstone agreed to buy the Bellagio casino and a resort in Las Vegas for $ 4.25 billion.
For James Packer, Crown’s largest shareholder with a 36% stake, Blackstone’s offer offers a new chance to leave Crown after at least two failed attempts to find a suitor. February’s damning exposure to widespread governance and cultural shortcomings at Crown was just the last blow to the billionaire, who withdrew from corporate life to fight a battle over mental health.
Prior to Blackstone’s offering, Crown shares had almost halved from a high of A $ 18 in early 2014. Covid-19 pandemic.
The risk for Blackstone is that it owns a company that is hampered by new regulatory action. The New South Wales investigation last month said Crown needed to revamp its governance, government and culture before gambling could begin in Sydney. CEO Ken Barton and five other directors have since resigned.
The investigation found that Crown had “enabled and facilitated” money laundering through bank accounts linked to the casinos in Perth and Melbourne for at least five years before 2019. was not identified, and conflict or potential conflict was not recognized.
Read more: Packer’s Casino Dream Demonstrated as Crown Unfit for License
A spokesperson for the NSW Independent Liquor and Gaming Authority said on Monday that the regulator is aware of the takeover approach but is unable to comment on any possible outcomes. “
An investigation into Crown’s suitability to run its casino in Melbourne begins on Wednesday, and a separate investigation into Crown Perth will also take place this year. This means that Blackstone could become the new owner of a company that has – at least temporarily – been banned from operating its three Australian casinos.
“This is a significant risk to consider,” said Xinning Xiao, a senior lecturer in accounting at Monash Business School in Melbourne who specializes in corporate governance. “The restructuring could take years.”
Representatives of the gaming regulators in Victoria and Western Australia did not immediately comment on Blackstone’s potential ownership of Crown.
What Bloomberg’s opinion says:
By raising his own management to run the show – the normal career for most private equity acquisitions – Blackstone will automatically carry out the wholesale management restructuring that Crown is likely to need to keep its licenses after a damning money laundering investigation.
– David Fickling. Click here to read the column
Previous attempts to reach an agreement with Crown have come to naught.
Wynn Resorts Ltd. abruptly ended talks in early 2019 to buy Crown for about A $ 10 billion, just hours after talks leaked to the media. Last year, Melco Resorts & Entertainment Ltd struck a deal to buy 20% of Crown from Packer.
Analysts at Macquarie Group Ltd. said late last year a merger of Crown with Sydney rival Star Entertainment Group Ltd. can hypothetically ‘create significant shareholder value’, although none of the companies has publicly addressed the idea.
A representative of Packer’s private investment firm declined to comment on Blackstone’s approach.
Blackstone wants unanimous approval from Crown’s board before the agreement can proceed, as well as permission from regulators to own and operate Crown’s casinos, according to the statement.
Last year, Blackstone bought its current stake in Crown from Melco for A $ 8.15 a share.
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