After the initial release of the inquiry report for Crown Resorts in February, a bidding war for the Australian’s gambling scene gem is well underway. The allegations against the gambling operator link it with a money-laundering scheme and organised crime.
Watchdog later stated that the operator is not fit to hold a gambling license for its Sydney-based casino that is supposed to open soon in a skyscraper overlooking the Sydney harbour.
Many have expected James Packer, one of the most criticised people in the initial report, to sell his 37% stake in Crown Resorts that he owns through his private company Consolidated Press Holdings.
The US private equity firm, Oaktree Capital, decided to raise the stakes after its initial April offer. The latest offer includes lending $3.1 billion to Crown Resorts to purchase back its shares owned by CPH. The new package deal includes a convertible loan and 9.99% of Crown Resorts.
However, Oaktree’s plan might not go as smoothly as Blackstone, a private equity company and Star Entertainment, an Australian casino operator, made offers to purchase the operator entirely. Crown Resorts have already dismissed Blackstone’s offer, saying it undervalues the company.
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However, the operator did not respond to Star’s offer, promising to make a decision soon. Star’s offer differs from Blackstone’s as it promises to deliver more value via cost savings. Those are estimated to be around $150 million to $200 million a year.
Selling Crown Resorts still seems very likely, although CPH agreed with regulators to neutralise the majority of their influence over Crown Resorts. However, we first heard about the deal in April, and nothing since.
The agreement states that CPH cannot appoint any nominees to the Crown’s board until October 2024. Similarly, the agreement features a ban on talking about the company’s operations privately.
Due to these circumstances, similar investigations are well underway for Crown’s casinos in Melbourne and Perth.
None of the offers is particularly attractive at the moment. Crown is likely to wait for more suitors, especially after the regulatory cloud over the Sydney casino lifts, which could bring in significant revenue.
For instance, Blackstone’s offer compares to a company value of 10.5x earnings before interest, depreciation, taxes, and amortisation, not including 2020 and 2021. This is not much of a premium offering compared to where it was trading before the pandemic, and regulatory concerns sank the stock last year.
On the other hand, Oaktree’s proposal means the company would take on more debt, but it would clear out its largest shareholder without selling the whole company.
Similarly, Star Entertainment’s offer is largely focused on promised cost savings that might not be as easy to achieve as the company claims.
Additionally, all offers are still much lower than the short-lived Wynn Resorts bid in 2019. However, Crown Resorts can still afford to play and wait for bids, so Oaktree’s offer might not be the last one.