Crown ups the ante on Blackstone to prepare revised bid

By Noah Taylor Updated
Crown Resorts off the ASX as Blackstone takeover confirmed

Crown Resorts will be applying pressure on private equity giant Blackstone to up its takeover bid for the company after briefing investors recently.

The Australian reports that on the basis of Crown’s 2023 earnings forecasts, JP Morgan analysts Don Carducci and Michael James expect Crown’s share price to rise to $14.40, they told clients.

“Earnings expectations for Crown vary quite broadly; the current FY23 range implies anything from another lockdown to all-systems-go,” they wrote.

“We believe the announcement of the investor so soon on the back of the most recent bid seems to offer the implication that December’s Investor Day will act as a catalyst for upwards revisions to expectations/forecasts.”

The additional revenue and earnings from Crown Sydney’s gaming operations would add five per cent or six per cent to consensus estimates in the 2023 financial year, the investment bank said.

“Clearly, there are a number of factors to consider such as: what would now be a ‘normalised level’ post-Covid? Has consensus already factored in such earnings? When will gaming be fully operational? What level of growth can be achieved?” they wrote

“However, what is clear, in our view, is that the recent bidding appears opportunistic, especially considering the potential upside a fully operational Barangaroo offers,” the note reads.

Crown rejects Blackstone’s third bid

In early December, Crown said the Blackstone bid, its third for the company, did “not represent compelling value”. 

But it has allowed Blackstone to access its books on a non-exclusive basis.

Blackstone’s bid, made on November 19, offers $12.50 cash per share, an increase of 15 cents from its previous offer.

They had traded as high as $13 earlier in the year as several interested parties emerged.

So far, no other bidders have come forward with offers for the company.

Carducci and James have also put a $15 per share price target on Crown, with Credit Suisse analysts Larry Gandler and Bradley Beckett suggesting it was worth the price.

That price assumed a “perfect execution” of a deal to split the company into an operating business and property-owning trust, they told clients.

James Packer, who owns 37 per cent of Crown through his private Consolidated Press Holdings vehicle, has also been in direct discussions with Blackstone.

Mr Packer will have to sell his stake down to five per cent after directives from state regulators.

Crown’s Sydney gaming floors have remained closed at the request of the NSW Independent Liquor and Gaming Authority.

In February, the Bergin report prepared for ILGA concluded there were significant governance issues at Crown.

The regulator is expected to hand Crown its operating licence for Barangaroo, where the hotel and entertainment offerings are already open, in early 2022.

Crown has also denied Blackstone an exclusive look at its books, leaving the door open for other suitors, such as Sydney casino outfit The Star Entertainment Group, to lob rival bids.

The New York-headquartered Blackstone already owns 10 per cent of Crown and has been courting the scandal-plagued casino operator for months.

It lobbed its first takeover bid at $11.85 per share in March and increased that to $12.35 in May, but Crown said both were too low.

Crown shares were trading just below $10 before Blackstone’s latest offer was revealed in November.

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