Blackstone locks in $8.9bn takeover offer for Crown Resorts

US private equity firm Blackstone Inc. has won the bidding war to acquire Crown Resorts (ASX: CWN) in a massive $8.9 billion takeover offer.

Through this agreement, Blackstone will purchase all shares in Crown for a price of $12.50 per share through a Scheme of Arrangement. This offer is higher than the previous bid submitted by Blackstone of $11.85 per share earlier in March 2021, which was knocked back by Crown, who claimed it undervalued the Company’s assets and future earnings power.

The revised offer follows a recent onslaught of bad news from the findings of the Royal Commission into Crown, which suggests that the Company was unsuitable to operate its Casino because of evidence of facilitating money laundering and underpaying taxes – the Casino has continued with its licence. It has a two-year window to prove it is rectifying the issues under the watch of a government-appointed special manager.

The Company is also working with Government regulators in New South Wales to show suitability, and reach an agreement to open a $2.2 billion casino and hotel in Barangaroo Sydney. This is subject to the Company proving that it has reformed its practises and turned things around.

The New York based private equity giant Blackstone will have to grapple with new regulations on the Casino’s flagship Melbourne location. If the deal goes ahead, it will have to receive clearance from regulators in each state to continue operations.

Crown has said that it will recommend that shareholders accept Blackstone’s offer, which a vote will decide in the second quarter of this year.

“The announcement today represents a compelling offer for Crown shareholders to consider,” said Crown’s Managing Director and CEO, Steve McCann.

“The agreement with Blackstone also highlights the strength of the Crown brand and confidence in our future as we emerge from some challenging times.”

James Packer, the owner of Consolidated Media Holdings, which currently has a 37% stake in Crown Resorts, faced heavy scrutiny from regulators to exit the Company and reduce his holdings to no more than 5 percent after the Royal Commission found that he did not attend board meetings for four years while he was Chairman of Crown’s West Australian Subsidiary, Burwood Limited, along with admitting to many oversights at his Perth Crown Casino. If this deal goes through, Mr Packer will net $3.26 billion from the sale.

The Blackstone Group is the second-largest stakeholder with a 9.99% stake in Crown Resorts, which it acquired from Melco Resorts & Entertainment in April 2020. Melco had purchased the stake from Mr Packer’s Consolidated Press Holdings a year earlier but backed out of a deal to acquire a second tranche after regulators in New South Wales launched an independent inquiry.

Blackstone was one of two major groups that expressed interest in Crown, the other being Star Entertainment Group (ASX: SGR), which withdrew its offer of a $12 billion merger in July 2021 after deciding that it didn’t want to take on the due diligence.

“We are excited to bring our local expertise and global hospitality and gaming experience to contribute to Australia’s post-pandemic recovery and position Crown for future growth,” said Blackstone Managing Director, Chris Tynan

Blackstone already has a lengthy portfolio in the casino industry, with assets including the Bellagio, MGM Grand and the Cosmopolitan Casino in Las Vegas, and owns the Spanish Group Cirsa, which has 147 casinos around the world.

Crown’s share price has definitely copped the backend of the Royal Commission throughout the last year seeing the share price reach $13.33 in May 2021, and falling to $8.47 just a few months later in August. At the time of writing, the share price sits at $12.65 after gaining 3% on the back of today’s announcement.