Blackstone Group Makes Takeover Offer to Crown Resorts
Things have never looked darker for Crown Resorts in Australia. Facing both a Royal Commission inquiry and a potential revocation of its casino license, the company has been reeling for months. However, there may be a way out, but it is not what many were expecting.
On Monday, news broke that Blackstone Group Inc is proposing a buyout of Crown Resorts Ltd. They are offering $6.2 billion for the company. While this is a bit lower than many might expect, a lower offer for the company would be a better alternative than having to shut down.
Blackstone Group Offers $6.2 Billion for Crown Resorts
Many analysts believe that the only way that Crown Resorts can save its company is by getting rid of all of the old regime and get James Packer’s share of the company reduced to 10% or less. One possibility that wasn’t on the table until now is a buyout of the company. That option is officially on the table after a buyout announcement on Monday.
Blackstone Group Inc, an investment group in the United States, is looking to buy Crown Resorts Ltd at $6 billion. According to a report from the Wall Street Journal, the company is offering AUD $11.85 per share. The deal is contingent on the company being able to hold casino licenses in Melbourne, Perth, and Sydney.
Crown Resorts has received an “unsolicited” takeover bid by The Blackstone Group.
The Crown board is yet to consider the offer. pic.twitter.com/Blw2aOlBHL
— Josh Bavas (@JoshBavas) March 21, 2021
The offer is about a 20% premium on the share price from last week. While a sellout is not the most ideal of scenarios, it is still preferable to having the company lose its casino license. That’s exactly the scenario that the casino faces after various investigations have shown gross negligence by the company, including ties to criminal organizations.
According to Wilson Asset Management, one holder of Crown shares, “It’s nice to get a bid, and now it’s about price discovery. These stocks are trading at trough earnings and I wouldn’t be surprised to see further activity in the sector.”
Who is Blackstone Group?
Blackstone Group is a global investment business that invests capital on behalf of various businesses and individuals. According to its website, the company has over $38 billion in available capital to invest and has 95 portfolio companies.
Blackstone already has gambling-related assets in its portfolio. They have investments in Las Vegas, Spain, and even Australia. In fact, the company presently has a 10% share in Crown.
Crown Soars Most in a Year After Blackstone Offer
Blackstone Group offered to buy Crown in a $6.2 billion deal pic.twitter.com/79g1kbFlTg
— D.A. Market Securities (@itradeph) March 21, 2021
It will be interesting to see whether the company’s current 10% share will raise any red flags or make it more difficult for the company to buy Crown Resorts.
Crown is Evaluating the Offer
At the moment, the Crown Board of Directors is looking at the proposal. According to reports, the board hasn’t made any sort of decision about the offers but will be in discussions with “relevant stakeholders including regulatory authorities.”
Some believe that Blackstone’s price is a bit low. They believe the pandemic is the only reason Blackstone can make its current offer. Nathan Bell is the portfolio manager at Intelligent Investor and states, “Blackstone couldn’t get away with a price like this if the casinos weren’t being affected by COVID and the management issues at the same time. It’s only an opening bit. It’s a messy situation and offering to acquire a casino is a complex affair at the best of times due to all the regulation.”
However, this is not the best of times. If anything, we could call this the darkest hour for Crown Resorts. A perfect time for anyone looking to acquire the company.
Regarding regulation, we think that Bell would be right in normal situations. However, the current scandal surrounding the Crown could make Blackstone the perfect way to put this matter to bed for everyone involved.