A bid offer to purchase Australia’s Crown Resorts Ltd in a proposed deal where the casino operator was valued at $6.2 billion was made by Blackstone Group Inc. the valuation offered for Crown Resorts is lower than the value of the troubled company a year go. And yet this could be good news for the company as it would provide it reprieve from regulatory pressure.
There was a 20 per cent spike in the shares of Crown after the company disclosed the informal offer as its share prices surged passed the indicative price of Blackstone at A$11.85 a share as investors betted that the company could get a bigger offer – and hence a larger payment for the investors, from the number 1 private equity firm of the world or another suitor.
“It’s nice to get a bid, and now it’s about price discovery,” said John Ayoub, a portfolio manager at Wilson Asset Management, which has Crown shares. “These stocks are trading at trough earnings and I wouldn’t be surprised to see further activity in the sector.”
If the deal goes through, the gambling-related assets in Blackstone’s portfolio will range from Las Vegas to Spain and with resorts in three Australian cities.
However the deal also means that equity firm would be taking over a company in crisis since Crown has lost its license to operate a flagship new casino on Sydney’s waterfront last month because of alleged money laundering and charges of the company having links to organized crime.
There are also inquiries undergoing in two other Australian states where Crown still has the license to operate casinos.
Crown is also being investigated by Australia’s financial crimes agency for allegations of money laundering while the company also is facing two civil lawsuits in which it has been accused of having failed to disclose risks which led to a drop in its share price.
The indicative offer from Blackstone was lower than the stock price of the company prior to the concerns among investors about the coronavirus pandemic which rocked the market early last year
“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,” said Nathan Bell, portfolio manager of Intelligent Investor, which has Crown shares. “It’s only an opening bid. 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.”
No view on the proposal had been formed by it board, Crown said, but added that it would talk to “relevant stakeholders including regulatory authorities.”
With a 36 per cent stake in the company, James Packer the founder of Crown is set to receive about A$2.9 billion if the deal goes through.
No comment on the issue was available from Packer. The move was confirmed by the second largest shareholder of Crown, with 9.99 per cent stake, but did not elaborate.
(Adapted from LeaderPost.com)