Blackstone tweaks its Crown takeover proposal

By William Brown Updated
Royal commission hears that Crown was reluctant to implement tighter money laundering controls

Australian casino operator Crown Resorts said private equity giant and 10 per cent shareholder Blackstone Group has modified the conditions of its proposed $8 billion buyout.

Mingtiandi reports that Crown has already been found unfit to hold a gambling licence for its Sydney casino due to alleged links to organised crime and faces royal commission’s in Victoria and Western Australia, the two other states where it operates.

In March, US buyout specialist Blackstone offered to buy Crown shares it doesn’t already own for A$11.85 each.

The modified conditions Blackstone has attached to its Crown proposal safeguard Blackstone against an adverse recommendation in the current royal commission’s, such as the cancellation or suspension of Crown’s WA or Victorian licences before the deal is approved by the court.

A statement from Crown added that Blackstone expected to receive approvals to buy Crown from each state regulator by the third quarter of 2021, without specifying when during the July to September quarter it expected the result.

The Victorian and WA inquiries are due to deliver their recommendations in August and November, respectively.

Crown also clarified that Blackstone’s bid was not conditional on arranging financing for the deal.

A Blackstone representative declined to comment.

Crown added its board of directors was still assessing the proposal.

Crown found James Packer, who stands to receive about A$2.9 billion from the deal by selling his nearly 37 per cent stake, said he was open to the proposal.

Blackstone’s offer for Crown faces a number of hurdles

As Crown Resorts received its first takeover offer from private equity firm Blackstone, the ABC reported in early April that any takeover bid faces numerous hurdles, including negotiating a fair sale price.

Crown said its board had not yet formed a view on the merits of Blackstone’s proposal and would start a process to assess it.

A proposed takeover bid faces numerous hurdles and regulatory risks, including several inquiries into Crown by state-based regulators, looming class actions and financial regulator AUSTRAC investigating Crown for potential breaches of Australia’s anti-money laundering and counter terrorism financing laws.

Blackstone, which manages A$800 billion of assets globally, already owns about 10 per cent of Crown.

The private equity firm has been operating in Australia for 11 years and has invested $14 billion across Australia and New Zealand, predominately in commercial and industrial real estate.

It has a team of about 30 people employed locally.

Blackstone not new to casino acquisitions 

Private equity funds take investments from wealthy individuals or other fund managers to buy distressed businesses or discounted assets on the cheap.

They then usually either turn the business around and resell it or split it up and sell the most valuable assets for a profit.

Blackstone sees an opportunity in acquiring Crown’s property assets and has likely weighed up the regulatory risks it knows of so far.

But the offer is at this stage just indicative and non-binding.

This means it is subject to a number of conditions, including making sure the casino is deemed fit and proper to hold its casino licences in Sydney, Melbourne and Perth.

There will also need to be a unanimous recommendation from Crown’s board and a commitment from all Crown directors to vote in favour of the proposal, as well as approval from Blackstone’s investment committee.

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