Blackstone Raises Bid For Crown Resorts To $13.10 Per Share

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Blackstone Raises Bid For Crown Resorts To $13.10 Per Share

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  • Offer subject to due diligence and final regulatory approvals
  • Support of 37 percent shareholder Consolidated Press Holdings appears likely
  • Ramp-up of Crown Sydney underpins investor appeal 
  • Crown intends to accept Blackstone offer once unconditional.   

Crown Resorts Limited (‘Crown’) is an integrated operator and developer of luxurious, integrated resorts and entertainment facilities and the operator of digital betting exchange, Betfair Australasia. Crown’s casinos operate in Melbourne, Perth and London. A third Australian casino in Sydney is ready for commencement of gambling activities, subject to receipt of necessary gaming approvals. Regulatory approval is expected early this calendar year.

Higher Blackstone Takeover Bid

Crown Resorts has announced an increased bid price for its shares from an entity representing investors advised by Blackstone Inc. and its affiliates (together, Blackstone). Blackstone is Crown’s second-largest shareholder at 10 percent, behind the James Packer-controlled Consolidated Press Holdings (‘CPH’), at 37 percent.

The revised non-binding offer follows Blackstone’s prior bids of $11.85, $12.35 and $12.50. This most recent offer price of $13.10 is subject to finalisation of Blackstone’s due diligence enquiries, before a binding offer can be put forward for consideration by Crown. The offer is structured as a Scheme of Arrangement and Crown has stated that it is the board’s current unanimous intention to recommend the offer at $13.10 per share, once it is unconditional.

It is understood that Crown are presently engaging with regulatory authorities to ensure that there are no ‘last-minute’ regulatory hurdles that could delay finalisation of the bid by Blackstone.      

Regulatory headwinds abate

Regulatory uncertainty has plagued Crown over recent years. In response to regulatory intervention, Crown has actively engaged with regulatory authorities and developed a Remediation Plan. Broadly speaking, the plan resulted in a board and management re-fresh, improved organisational culture covering responsible gaming and improved risk management, as well as changes to the relationship with major shareholder, CPH. CPH is no longer separately represented on the Crown board and has agreed to sell down its 37 percent holding by September 2024. Certain information sharing arrangements have also been terminated. Crown has ceased dealing with junket operators and will implement a comprehensive Significant Player Review process, as a key element of the Remediation Plan.     

In the absence of the Remediation Plan, Commissioner Finkelstein observed it was inevitable that Crown Melbourne would be declared unsuitable to hold its casino licence. Just when it appeared that Crown Melbourne was ‘in the clear‘, the Victorian Commission for Gambling and Liquor Regulation, fined Crown Melbourne $1 million for failing to comply with regulatory requirements in relation to historical junket operations. The $1 million fine for the breach is the maximum fine currently available.  

Nevertheless, Crown has stated that the Remediation Plan is progressing well and has committed to providing regulators with on-gong updates on its reform measures.  

Crown Sydney growth opportunity

It is the earnings growth potential of Crown Sydney that has magnified the investor appeal of Crown to astute investors like Blackstone. 

The Star Sydney is Australia’s second largest casino after Crown Melbourne. A comparison between the table games revenue of the two casinos reveals that Crown Melbourne significantly outperforms Star Sydney. In CY2019, Crown Melbourne earned $135 million, or 16 percent more gaming table revenue, than Star Sydney. This is despite Sydney having a 7 percent higher adult population, 13 percent higher weekly household income, 118 percent more gaming machine revenue and 39 percent more international overnight visitors, compared to Melbourne. 

Sydney being the major gateway to Australia for international visitors, is anticipated to provide significant earnings upside for Crown, once Crown Sydney gaming tables become operational in CY22.  

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at l.mosmann@kosec.com.au.

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