Crown’s luck may change as $8bn bid revised
James Packer’s third attempt in less than three years to sell Crown Resorts could be done and dusted by the end of the year after US private equity suitor Blackstone revised its $8bn buyout offer, but it is conditional on the casino giant emerging from two royal commissions relatively unscathed.
In a statement on Tuesday, Crown Resorts said the $11.85per-share scheme of arrangement still contained a stipulation that Blackstone, which currently owns 10 per cent of Crown, would receive approval from regulators in NSW, Victoria and Western Australia to fully buy out the company, but it no longer contained the provision that Blackstone also be deemed a suitable person as licensee.
Now, Blackstone says the offer hinges only on receiving regulatory approval for the takeover, with the additional stipulation that it can withdraw its bid if state regulators threaten to or make “material adverse change” to Crown’s casino licences before the second court hearing of the takeover process.
The date for a second court hearing is not set as Crown is yet to accept the takeover offer, but Blackstone expects it will receive the necessary regulatory approvals to take over Crown in the “third quarter” of the year, clearing the way for a deal to take place sooner than if it had to wait for regulatory confirmation that it was a suitable licensee.
It puts pressure on Crown to reach a determination on the offer sooner, but also means Blackstone could take on more regulatory risk if the parties lock in a deal before the respective state governments indicate which recommendations of the royal commissions and inquiries they will take up.
The dual royal commissions facing Crown in Victoria and WA are due to report in August and November respectively.
The NSW Independent Liquor and Gaming Authority, which found Crown not suitable to operate its Sydney casino in Barangaroo, has said Crown could receive permission to open its Barangaroo casino before the end of the year, subject to certain conditions.
But until such time as a second court hearing is set Blackstone can walk away from the deal if “Crown’s Vic or WA casino licences is, or is threatened to be, cancelled, suspended or surrendered” before that time or if it looks like its “NSW licence is not to be granted”
This is also the case if any conditions imposed on Crown by regulators “when combined, constitute a material adverse change” or have “a financial impact on Crown of greater than an agreed threshold”.
This term could be activated if any of the commissions or state regulators “recommends or indicates that it will recommend” conditions that will materially
affect the company. It means that if any of the state governments make an early indication that they may pursue more ambitious ideas for reform — such as the Bergin inquiry’s endorsement of mandatory gambling cards to reduce the risk of money laundering — the deal could fall through.
James Packer, who owns 37 per cent of Crown Resorts, has indicated he is open to the sale and has retained Moelis Australia as an adviser.
The Victorian royal commission into Crown’s suitability to operate its Melbourne casino was launched last month.
In his opening remarks, Victorian commissioner Ray Finkelstein said he was concerned with contemporary issues relating to money laundering and problem gambling at the Melbourne casino, rather than past wrongdoing.
It is expected a hearing timetable with a list of individuals set to appear before the commission will be released shortly.
The WA royal commission into the company’s suitability to operate its Perth casino held its initial hearing this week. The royal commission is chaired by former Supreme Court judge Neville Owen, who also headed the HIH Insurance royal commission in the early 2000s.
Earlier this week Crown named South Australian business identity and former SkyCity board member Bruce Carter as the latest addition to its overhauled board.
Mr Carter, who recently stepped down as deputy chair of New Zealand-based casino operator SkyCity, will join the company as a non-executive director, subject to regulatory approvals.
He is the second SkyCity alumni to join the Crown board after its former CEO Nigel Morrison was appointed as a director in January.
Crown Resorts shares closed at $12.07, down 0.17 per cent.