Crown opens books to Blackstone for potential fresh takeover proposal

| By Robert Fletcher
Australian land-based operator Crown Resorts has turned down the latest takeover proposal from Blackstone, saying that it did not represent “compelling value”, but invited the private equity group to make another offer.
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Last month, Blackstone submitted an unsolicited and non-binding proposal that valued the Crown business at approximately AUD$8.46bn (£4.52bn/€5.31bn/US$6.01) and would see group pay $12.50 in cash per each Crown share.

Blackstone currently holds a 9.99% stake in Crown and the takeover proposal would have seen it take full ownership of the operator.

Crown said its board considered the offer but was of the view that the proposal “did not represent compelling value for Crown shareholders”.

However, Crown’s board has now 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 to formulate a revised proposal that it said “adequately reflects the value of Crown”.

Crown noted the provision of such information is conditional on the two parties entering an appropriate confidentiality agreement, adding that there is no certainty these discussions will result in a revised proposal from Blackstone.

“The Crown board is focussed on maximising value for Crown shareholders and will carefully consider any proposal that is consistent with this objective,” Crown said.

Blackstone previously had two other takeover proposals turned down by Crown, the first of which was put forward in March this year, representing an offer of $11.85 cash per share. This was increased to $12.35, but Crown turned down the proposal saying it undervalued its business.

Crown has also had proposals from a number of other parties in recent months, including an offer from rival operator Star Entertainment Group in May to merge with Crown and create a combined operation worth approximately $12.00bn.

Crown requested further details, but the Star withdrew its proposal in June, citing concerns over ongoing regulatory processes with Crown in Victoria.

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

Concerns over Crown’s regulatory future in Victoria, Western Australia and New South Wales saw Blackstone include an implementation agreement in its proposal, setting out terms and conditions such as the necessary approvals from relevant courts and gambling regulators.

In October, 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 was also found to be unsuitable to operate a casino in the Barangaroo area of central 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 casino if it makes certain changes, including compliance and financial audits and an end to its dealings with junkets.

The Western Australia Government is also currently investigating Crown Resorts, to assess its ability to operate a casino in Perth. In July the inquiry was extended until March 2022.

The clause was also present in Blackstone’s original takeover proposal.

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