Crown Rejects “Undervalued” Blackstone Group Offer
Last week, news broke of a second major buyout offer for Crown Resorts. Star Entertainment Group made an offer of A$9 billion for the company. After receiving the offer, Crown is now rejecting the original offer of A$8.4 billion from The Blackstone Group.
According to Crown, the offer undervalues the company. However, that doesn’t mean that they will be taking the Star offer as they are now seeking additional information regarding their offer. Of course, Oaktree’s offer is still on the table – at least for now.
Crown Resorts Rejects Blackstone Group Offer
News broke on Monday from various sources that Crown Resorts is rejecting a takeover offer from The Blackstone Group. Blackstone was willing to offer A$12.35 per share or A$8.4 billion for the outstanding shares of Crown stock.
— iGB (@iGamingBusiness) May 17, 2021
According to a statement from Crown, they have considered various scenarios regarding the company and determined that Blackstone’s offer undervalues the company. Crown says that the offer fails to consider the value of corporate assets or the potential increase in revenues once they recover from the pandemic. The company plans to pay down debt as part of its bounce-back plan.
Crown’s stance seems to reflect that of many investors in the company. When Blackstone’s offers was made, there were some that spoke out on the deal, claiming that it was a bit of a lowball offer. Now, Blackstone will have to decide whether they want to up their offer. At the time of this report, Blackstone has yet to comment on Crown’s decision.
More Information Needed for Star Offer
While Crown Resorts has rejected Blackstone’s current offer, that doesn’t mean they are going to go with the Star offer. Crown issued a separate statement claiming that they have yet to form an opinion on the Star merger offer. However, they are requesting additional information regarding preliminary matters.
Some of those inquiries could involve questions about antitrust status. Once Star made their offer for Crown, rumblings about antitrust concerns began. If Star and Crown merge, this would create a single gambling company for all of Australia without a challenger – at least presently.
OPINION | Crown Resorts’ rejection of Blackstone’s bid shows it is growing increasingly confident that its redemption is within reach, even as two royal commissions rage, writes #Chanticleer. https://t.co/UYog0KrvN6
— Financial Review (@FinancialReview) May 17, 2021
Crown does not need additional regulatory problems considering the matters that landed them in their current situation. Company executives are starting the first week of hearings for an inquiry in Victoria. The government is deciding whether to revoke the Crown’s Victorian license. If you remember, part of Blackstone’s offer is that the company retains all of its licenses.
Oaktree Offer Still on the Table
Crown has yet to make an official statement regarding the offer from Oaktree Capital Group. The group has offered to fund a buyout of James Packer’s shares in the company. Packer has a 37% share presently, making the offer worth around A$3 billion.
Out of all the proposals, this one would have the least impact on the present corporate structure of the company. Both the Blackstone and Star proposals would make Crown a new entity, while the Oaktree offer would simply remove the biggest roadblock to Crown retaining its license.
Don’t Overlook the Oaktree Offer for Crown Resorts
In the end, we predict that Oaktree’s offer will garner much more consideration than one might expect. The biggest requirement voiced by regulators is over James Packer’s role in the company. Oaktree’s buyout would eliminate Packer entirely and allow the company to move forward to a new era.
Star’s offer will potentially open a new set of problems over antitrust laws. This is something that Crown may look to avoid unless they can receive assurances that regulators will allow the merger to happen.
Right now, the safest play is the Oaktree offer. Unless Blackstone comes back and blows Star’s offer out of the water, we could see Oaktree’s offer become the primary considering for Crown in the coming weeks.
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