Shares in Crown jumped by 21% to $11.97 yesterday as investors punted on either a second takeover offer or a higher price from Blackstone, the big US private equity company which on Sunday dropped an $11.95 a share non-binding offer on the company.
The offer values Crown at $8 billion and you can bet the the way the shares closed higher than the $11.85 a share offer, investors think it will be raised or a rival casino linked group will appear with an offer.
The offer price of $11.85 a share was a big premium to Friday’s close at $9.86 and it looks almost certain that the price if an opening gambit and the eventual winning price will be north of $12 a share.
That assumes the deal gets through all the conditions attached to the price by Blackstone.
Crown directors have told shareholders to sit and wait.
“The Crown Board has not yet formed a view on the merits of the proposal,” the company said in an ASX statement before trading opened.
“It will now commence a process to assess the proposal, having regard to the value and terms of the Proposal and other considerations.”
Analysts at Macquarie says Blackstone’s $8 billion takeover bid for Crown Resorts is in the right ballpark given Crown’s share price movements in recent years.
Macquarie analyst David Fabris said in a note on Monday that the bid came at a time of significant uncertainty for Crown, given the two Royal Commissions about to start into Crown Melbourne and Crown Perth, possible further delays opening Crown Sydney in the wake of the damning Bergin Inquiry, and the continuing AUSTRAC money laundering inquiry.
He said the Blackstone offer “may be the start of the end” for Crown, as the $11.85 a share on offer implied an earnings multiple in the mid-range of Crown’s long-run trading range.
James Packer will determine who wins with a 36% holding that he has to sell if Crown Sydney in particular is to open and remain operational after the Bergin inquiry found that his presence created problems for Crown’s suitability.
If he sells, he will get more than $3 billion.
Blackstone said its offer was conditional on due diligence; arranging debt finance; an unanimous Crown Board recommendation and a commitment from all Crown directors to vote in favour of the Proposal (in the absence of a superior proposal and subject to an Independent Expert concluding that the proposed transaction is in the best interest of Crown shareholders); execution of a binding Implementation Agreement incorporating various terms and conditions including a condition that Blackstone receive regulatory confirmation that a Blackstone-owned Crown is considered a suitable person to continue to own and operate the Sydney, Melbourne & Perth licences and other gaming-related approvals as required; and approval from Blackstone investment committees.
That’s a highly conditional offer with the most important being the regulatory approval. It is unclear whether Blackstone will submit itself for scrutiny by regulators. There are currently those two royal commissions into Crown’s activities in Victoria and Perth.
A commission on inquiry in NSW last year uncovered and confirmed media reports of widespread money laundering, association with overseas criminals, dud deals, weak management and board oversight and the dominance of the company’s affairs by James Packer to the detriment of the rest of the shareholding base.
Blackstone though must have already passed scrutiny in Nevada where it owns two casinos.
In 2019 it paid $US4.25 billion purchase and leaseback of the Bellagio Casino in Las Vegas to MGM.
That was after it bought the distressed Cosmopolitan casino in Las Vegas in 2014 for $US1.73 billion. Blackstone upgraded and renovated, adding more rooms and suites and still operates it as a casino resort.
