Blackstone returns with improved takeover proposal for Crown Resorts

| By Robert Fletcher
Private equity group Blackstone has submitted a revised takeover proposal for Australian operator Crown Resorts, increasing its bid to approximately AU$8.87bn (£4.71bn/€5.64bn/US$6.46bn).
Victorian Government announces Crown extension

The latest proposal would see Blackstone pay $13.10 in cash per Crown share, representing an increase of $0.60 cash per share compared to the previous offer price of $12.50 cash per share. That bid was rejected by Crown in November 2021.

At the time, Crown said the bid did not represent “compelling value” but invited Blackstone to return with another proposal. 

Crown also offered Blackstone the opportunity to access non-public information to allow the group to carry out initial due diligence inquiries on a non-exclusive basis, in order to form a revised proposal that it said would “adequately reflect the value of [the business]”.

Having considered the new offer, Crown’s board said it is in the interests of its shareholders to engage further with Blackstone on a non-exclusive basis. As such, it will provide Blackstone with the opportunity to finalise due diligence inquiries and negotiate the terms of an implementation agreement so that it can put forward a binding offer.

Should Blackstone make a binding offer at a price of no less than $13.10 cash per share then, subject to the implementation agreement, Crown said its board would unanimously recommend that shareholders vote in favour of the proposal.

The latest proposal also remains subject to the same further conditions as the previous bid, including final approval from casino regulators in each of Victoria, New South Wales and Western Australia.

Crown noted that there is no certainty the discussions with Blackstone will result in a change of control transaction or an offer capable of acceptance by Crown shareholders.

Blackstone previously had two other takeover proposals turned down by Crown, the first of which, representing an offer of $11.85 cash per share, was put forward in March 2021. This was increased to $12.35, but again rejected for undervaluing the business.

Crown also drew interest from a number of other parties, including an offer from rival operator Star Entertainment Group to merge and create a combined operation worth approximately $12.00bn. However, Star withdrew its proposal due to its concerns over ongoing regulatory processes with Crown in Victoria.

Alternative investment management business Oaktree Capital Management put forward a proposal to provide up to $3.00bn in funding for a share buy-back programme, and later increased this to $3.1bn.

Included within the Blackstone proposal is an implementation agreement in relation to Crown’s regulatory issues in Victoria, Western Australia and New South Wales, with this setting out terms and conditions such as the necessary approvals from relevant courts and gambling regulators.

In October last year, Crown was deemed “unsuitable” to run a casino in Victoria after it was found to have engaged in conduct that was “illegal, dishonest, unethical and exploitative”, but it will not immediately lose its licence and instead face special measures in the state.

Crown in February 2021 was also found to be unsuitable to run a casino in the Barangaroo area of Sydney after the New South Wales Casino Inquiry (Bergin Inquiry) found evidence that its facilities and accounts were used for money laundering. 

However, it may still be able to operate the Barangaroo casino if it makes certain changes, including compliance and financial audits and an end to its dealings with junkets.

In addition, the Western Australia government is investigating Crown to assess its ability to operate a casino in Perth. Its inquiry is due to conclude in March 2022.

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