The large US private equity firm Blackstone Group has made a bid for Australia’s major gaming and entertainment company Crown Resorts, for around A$8 billion or US$6.2 billion.
The current market capitalisation of Crown Resorts is slightly above A$8.7, which makes Blackstone’s valuation close to its worth. However, the Blackstone Group already owns 9.99% of the company.
Furthermore, the buyout offer represents A$11.85 per share, around a 19% premium to the average stock price based on the Crown Resorts’ financial results from a month ago.
The bid is a welcomed sight to many as the gaming operation of the notable Australian billionaire James Packer has been under pressure as of late. Australian regulators deemed the Crown Resorts not fit to run a novel casino resort in Sydney valued at A$2.2 billion. The ruling came due to significant concerns about possible money laundering and bad corporate governance.
The Crown stated that the company hasn’t yet formed an opinion or formal view about the proposal’s merits. Executives are set to begin a process to assess the proposal.
The company made a statement to the Australian Securities Exchange. It said that the process would involve considerations of the value and the terms of the proposal and engagement with relevant stakeholders and the proper regulatory authorities.
As soon as the news broke, Crown Resorts’ shares jumped 18% to A$11.61 per share.
Blackstone Group has been entering the casino sector in the last few years, and successful purchase of Crown Resorts will show a further push into the industry.
However, the agreement relies heavily on James Packer’s opinion. He is the biggest owner of Crown Resorts as he holds 37% of the shares.
It’s unknown if he will be willing to sell, but analysts are hopeful, judging by the Crown’s regulatory problems and Packer’s personal circumstances.
Furthermore, the billionaire made attempts in the past to take the company private and has already left the board of directors in 2018 due to mental health issues. He was later criticised by the government-commissioned inquiry in New South Wales, which stated that the billionaire needs to cease his remote manoeuvrings for the good of the company.
The same inquiry concluded that the Crown could not operate its major Sydney casino and that it had unwittingly enabled money laundering.
Five directors of the company resigned after the inquiry was concluded and the report made public. However, the whole ordeal is not yet over as two additional investigations are ongoing in Western Australia and Victoria. They are set to conclude in the near future.
These problems could be fixed if Blackstone were to take over the Crown Resorts. However, it would be best for Packer and his private investment company to completely sever ties with the entertainment organisation for all of it to be successful.
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