Blackstone could attract Crown with their new bid

Has it really happened and Crown Resort Ltd has decided to accept the latest Blackstone Group bid? The story seems to be coming to an end. In 2021 Oaktree Capital Group and Star Entertainment wanted to buy Crown Resort, but the company rejected their proposals. Later Blackstone Group Inc, the United States investment management company also made a number of bids to them, but they rejected those multimillion proposals. But this January Blackstone sweetened their takeover and it looks like Crown Resort is considering their new bid and is going to submit it.

First attempts to purchase Crown Resorts failed

Crown owns luxurious resorts with hotels and casinos in Sydney, Melbourne and Perth. The company is the largest gambling operator in Australia.

There were several bids in attempts to buy Crown Resorts last year:

• from Oaktree Capital Group, a world asset management company specializing in alternative investment strategies;
• the Star Entertainment Group, an Australian gambling and entertainment company;
• Blackstone Group Inc, an investment management company.

Blackstone is not new in the Australian gambling market. They bought a 10% stake of Crown in April 2020, and now appear to be the second largest shareholder. In March 2021, Blackstone offered to buy the remaining stake for A$8 billion in Crown. However, that proposal was rejected.

In April 2021, Oaktree Capital Management offered to acquire up to A$3 billion of funding to Crown Resorts to buy back their shares from Consolidated Press Holdings. A bit later they increased their offer, but did not get an approval.

Star Entertainment threw into that battle in May. It submitted a conditional, non-binding, indicative proposal to merge with Crown. Star offered a A$8.4 billion buyout of Crown.

Later all companies raised their proposals. However, by September 2021, Crown had stopped all negotiations with all potential buyers.

The Start Of A Big Crisis For Crown Casino

Crown faced the first problems in 2019 after some media reports that informed that Crown Group had links with Asian gangs, provided opportunities for money laundering and some other gambling laws violations. Crown replied: “As a board, we are extremely concerned for our staff, shareholders and other stakeholders, as much of this unbalanced and sensationalised reporting is based on unsubstantiated allegations, exaggerations, unsupported connections and outright falsehoods.”

However, the famous Australian watchdog, the Victoria Commission for Gambling and Liquor Regulation (VCGLR) started an investigation and in April 2021, Crown Resorts  Group was fined $1 million. VCGLR Chairman Ross Kennedy said: “Robust processes must be implemented to ensure the Casino remained free from criminal influence and exploitation. These are strict and legislated regulatory requirements, and this is an area where Crown repeatedly failed.” 

At the very end of 2021 Crown was fined $1 million again for failing to fulfill the regulations concerning checking out high roller “junket” tour operators for criminal links.

Blackstone Bids during Crown’s crisis

After Crown had rejected the Blackstone proposals in the first half of the year 2021, there was a quiet period until November when Blackstone made a new proposal. That time, Blackstone increased their bid up to A$8.5 billion on the table. That proposal appeared after new waves of accusations in breaching the gambling rules. Therefore, Blackstone stated: “Any acquisition of Crown by Blackstone would be conditional on Blackstone receiving final approval from the casino regulators in Victoria, New South Wales and Western Australia.”

The Blackstone bid to buy Crown via a scheme of arrangement depended on some conditions including exclusive due diligence on Crown’s books, final approval by Blackstone’s internal investment committee, and a unanimous Crown board recommendation to shareholders. But the Crown said: “No”

In December Blackstone sweetened their proposal. But Crown declined it again. Steven McCann, Crown chief executive said: “We’ve made it clear that we don’t think that the offer is compelling value. We’ll be looking at every alternative to try and maximise value…”

All the Blackstone Bids

Bid	When	Per Share	Sum for acquiring the remaining shares
1	In March 2021	A$11.85	A$8.02 billion
2	In May	A$12.35	A$8.4 billion
3	In December	A$12.50	A$8.5 billion
4	In January 2022	A$13.10	A$8.87 billion

A$8.87 billion weighs heavily in its favour

This January, Blackstone Group made the fourth takeover to Crown Resorts. The company is ready to pay A$13.10 per share now including a complete acquisition of 37% Crown Resorts that belong to James Packer's private investment company, Consolidated Press Holdings.

This bid showed the investors’ interest on Australian assets. You know, due to the pandemic, the popularity of hotels and land-based casinos decreased and the interest in virtual entertainment including internet gambling venues has grown enormously. And there are a number of reasons for that:

• Potential and current gamblers don’t need to go anywhere. They can play wherever they are;
• The risk to catch Covid-19 at home decreases;
• Online casinos offer generous promotions to their customers;
• Everyone can try casino games for free when gambling online.

However, Blackstone keeps pursuing Crown. And this time everything indicates that Crown Resorts are ready to accept their proposal. Crown stated if Blackstone made a binding offer at A$13.10 per share, it was the board’s “current unanimous intention to recommend that shareholders vote in favour of the proposal”. This made Crown’s shares rise by about 9%.

This deal needs approval from casino regulators in three Australian states - Victoria, New South Wales and Western Australia, and a shareholder vote.

On 13 January, Crown invited Blackstone to accept a final bid and discuss the terms of an implementation agreement. Everyone has expected everything be solved by the end of January. However, there is no news yet.

Besides the negotiations with Blackstone, Crown is thinking over talking with Star Entertainment. The company withdrew its interests after Crown Casino in Melbourne had lost its licence. But now, they expect Star Entertainment to make a new proposal to Crown. Matt Bekier, Star’s CEO, said he was still interested in a possible merger.

Let's see how this plays out.