US investment group Blackstone has raised its bid to buy Australian casino group Crown to nearly A$8.9 billion ($6.5 billion). In response, Crown Resorts has now agreed to enter takeover talks after the firm sweetened its prior offer, raising the total by about A$1 billion ($729 million).
The newly-proposed deal follows multiple prior attempts from Blackstone to buy the casino giant, backed by Australian billionaire James Packer. The last offer was made in November, although all past efforts to convince the company’s board to accept an offer fell through. During royal commission hearings in October, Packer told the Perth Casino Royal Commission that he had no objection to an order from a similar Victorian inquiry to sell down his shares in the Crown Group.
The new deal highlights global investors’ interest in the Australian gaming market despite the effects of the ongoing Covid-19 pandemic, reports Financial Times. The market has seen considerable activity for mergers and acquisitions over the past year, rising the value of deals to record levels.
But Blackstone was not the only party interested in acquiring Crown. The group has been the subject of a bidding war since May last year, which also included Star Entertainment Group, a smaller casino rival that has pursued a merger. Star withdrew its interest in July, after Australian authorities said Crown could potentially lose its license amid a money-laundering investigation.
However, the investigation has now concluded, and the threat of a license suspension was lifted in September. This prompted speculation of Star being interested in reviving its merger proposal, which was then valued at A$12 billion ($8.7 billion).
Blackstone is now set to complete its due diligence in the coming days. Should the firm make a binding offer at no less than A$13.10 ($9.56) per share, the bid will be unanimously accepted by Crown’s board, the company said, according to the previously cited news source.
“It is the Crown Board’s current unanimous intention to recommend that shareholders vote in favor of the proposal in the absence of a superior proposal and subject to an Independent Expert concluding (and continuing to conclude) that the proposed transaction is in the best interests of Crown shareholders,” the gaming giant said.
Blackstone already has experience in the casino sector. In 2019, the private equity investor agreed to acquire the real estate assets of the Bellagio Hotel and Casino in Las Vegas from MGM for $4.25 billion. The firm also already owns 9.99% of Crown.
The newest bid to buy Australia’s biggest casino operator is the fourth by the investment group, the prior ones having been dismissed as “not compelling.” The current price rise is allegedly supported by major investors, including founder James Packer, who collectively own around 60% of Crown stock, a person familiar with the matter told Reuters.
The cited person also expressed hopes of signing a deal “by January-end.” Consolidated Press Holdings (CPH), a vehicle owned by Packer with a 37% stake in Crown, said it was “encouraged” by the proposal and awaits further developments, reports the cited source.
Crown’s third-largest shareholder, investment manager Perpetual, was in favor of the revised proposal in the absence of a better offer. A second person familiar with the matter told Reuters a deal could be completed by the end of June.
"It is likely that a deal will get done," said Steve Johnson, chief investment officer at Forager Funds Management, which owns Crown shares. "The increase in offer price is a welcome step in the right direction and we are supportive of the board continuing a push for an appropriate firm offer for shareholders.”
Crown has faced its two hardest years after local media launched an investigation into the company’s relationships with junket operators tied to Asian crime syndicates, which shortly after prompted inquiries in Victoria, NSW and Western Australia.
These reviews led to the clearance of Crown’s management and board, plus newer strict license conditions. Crown has now cut all former partnerships with junket operators, and the group has worked in improving its balance sheet.
In December, Crown announced plans to offer gambling at a new Sydney resort in early 2022, as the operator works with regulators to address its governance failures. The $1.6 billion integrated resort first opened in December 2020, although without gaming after a government probe in New South Wales determined Crown was not suitable to conduct said operations.