The private equity investor becomes the 2nd-largest holder after James Packer

Blackstone acquires 10% stake in Crown from Melco

The investment has stoked speculation that Blackstone, with $570 billion assets under management, may lob a bid for more or all of the Australian company.
2020-04-29
Australia
Reading time 1:53 min
The sale of 67.7 million shares by Melco to the private equity firm for A$8.15 each valued the transaction at USD 359.04 million. Melco recently pulled out of a $1.76 billion investment of Crown because of the global impact on the entertainment and tourism sector caused by COVID-19.

Private equity company Blackstone Group bought a near 10% stake in Australian casino operator Crown Resorts from Macau’s Melco Resorts & Entertainment.

The deal accomplishes Melco’s plan to exit its Crown holdings as casino companies around the world rein in spending to cope with a shutdown to slow the spread of the coronavirus. Crown disclosed the deal in a market filing on Wednesday.

Crown confirmed in a statement the sale of 67.7 million shares by Melco to the private equity firm for A$8.15 each, putting the transaction value at A$551.6 million ($359.04 million).

Blackstone’s purchase makes the private equity investor the second-largest holder in Crown after the company’s billionaire founder James Packer, Reuters reports. The investment has stoked speculation that Blackstone, with $570 billion assets under management, may lob a bid for more or all of the Australian company.

Packer had planned to sell more of his 37% stake in Crown to Melco as part of a broader retreat from the business, but that deal encountered regulatory hurdles even before the coronavirus shutdown largely halted both companies’ operations.

Melco recently pulled out of a $1.76 billion investment of the Australian casino giant because of the global impact on the entertainment and tourism sector caused by COVID-19. The Hong-Kong based casino and entertainment company, headed by James Packer's former business partner Lawrence Ho, would have held around 20 percent of the entire company. 

Only half of the transaction was completed, with the remaining tranche canned as Melco decided to reassess all non-core investments to be made in 2020. The deal was already subject to a local investigation by the NSW Independent Liquor and Gambling Authority for possible contraventions of the Casino Control Act.

Shares of Crown jumped as much as 12.3% to their highest since March 6 and were up 10% against a 1% gain on the benchmark ASX200 index .

“The sale has certainly stoked the fire of perceived corporate activity in Crown,” said James McGlew, executive director of corporate stockbroking at Argonaut, as reported by Reuters. “Hard to say if (a takeover) is imminent but as with big game hunting, it’s easier to track prey when it is weakened. COVID-19 has certainly done this to the casino and resort sector,” McGlew added.

Crown shares were trading at A$9.45 by early afternoon, a premium to the Blackstone purchase price, indicating investors are expecting Blackstone may add to its holdings. The company’s shares have declined 21% since Feb. 20 when restrictions on movement, including border closures, battered industries that depend on public entertainment and tourism.

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