Star Entertainment and Blackstone face off in bidding war over Crown
A bidding war erupted for Crown Resorts with rival casino operator Star Entertainment proposing an all-stock merger and Blackstone sweetening its cash takeover bid.
Star said its offer would create an Australian gaming and hospitality giant with a market value of A$12bn as it unveiled plans to cut costs, as well as sell and lease back property, at the enlarged group. Minutes earlier, US private-equity firm Blackstone raised its offer for Crown by 4% to A$8.36bn.
Crown said it is assessing both proposals.
Bidders are circling Crown while it is cornered by regulatory investigations. A damning inquiry in February found the company was unfit to run its new Sydney casino after years of money laundering at properties in Perth and Melbourne, which are now the subject of fresh probes.
The competing proposals now offer Crown’s largest shareholder, billionaire James Packer, differing paths forward after he failed at least twice to sell his stake.
Packer, whose influence on Crown was criticised in the regulatory report in February, has stepped back from corporate life to fight a mental health battle. The Blackstone bid would give him a potential clean break.
Star’s proposal offers the billionaire the chance to swap some of his Crown stake for a smaller share in the merged entity.
Shares of Star leapt 8.2% to A$4.23 in Sydney. Crown jumped 7.3% to A$13, valuing the Melbourne-based company at A$8.8bn.
INSTANT REWARD
The board of Crown, with the outcome of the Perth and Melbourne inquiries hanging over the company, must now weigh up the instant reward of Blackstone’s cash offer with the potential long-term benefits of a union with Star.
Star’s proposal “creates a long-term opportunity for the capital market which would not exist if Crown gets bought by an American private equity firm”, Star CEO Matt Bekier said in an interview after the proposal was announced. “We have a management team that is in good standing with all the regulators in all our jurisdictions so we think we can pull this off with relatively low risk.”
Star announced a nilpremium offer of 2.68 of its shares for each Crown share — the equivalent of A$10.48 a share based on Star’s closing price Friday. Star’s bid also includes a cash alternative of A$12.50 a share for as much as 25% of Crown’s issued shares. Assuming the cash component is fully taken up, the offer equates to a value of A$7.44bn.
That is much less than Crown’s market value. But once savings and benefits from the merger are included, Star said its proposal implies a potential value of A$14 per Crown share.
Star said it can deliver A$150m to A$200m in annual cost savings from areas such as head office, marketing and technology, that would have a combined net value of A$2bn.
The company also plans a sale and leaseback of the enlarged group’s property portfolio. According to a Star presentation detailing the company’s proposal, the combined group’s key casino properties could sit in an unlisted fund that is half owned by institutional wholesale investors.