aktree Capital Group has proposed funding a A$3 billion ($2.3 billion) buyback by Australia’s Crown Resorts Ltd of its founder James Packer’s stake, just a month after Blackstone lobbed an A$8 billion full takeover offer. The news also comes a few days after Packer struck a deal with the New South Wales gambling regulator to reduce his influence over Crown, which may help the firm retain its Australian casino licenses.
Private equity giant Oaktree’s offered a “structured instrument” to help Crown buyback James Packer’s 37% stake. Crown did not specify what Oaktree would receive under its proposal, which it said it was considering, along with Blackstone’s offer, Reuters reports.
Packer’s status as Crown’s major shareholder has been under scrutiny since an inquiry named his influence as a factor when it in February declared the company unfit for a Sydney casino licence, citing activities including money laundering. Oaktree’s approach to removing Packer from the register would give Crown a way to resolve regulator concerns without selling the whole company at a price below pre-coronavirus levels.
Packer, who left the Crown board in 2018, has indicated he is willing to sell up his stake and has said he supports the board’s decision on an exit strategy. Many investors have declined to endorse Blackstone’s approach, saying it undervalues the company, pointing to Crown’s higher market capitalization in early 2020 before the pandemic and regulatory attention hammered its shares.
In a statement last week, the NSW Independent Liquor & Gaming Authority said Packer’s private investment vehicle, Consolidated Press Holdings (CPH), had agreed to give “ a number of undertakings regarding Crown Resorts and its associates,” The Guardian reports.
The in-principle deal, which ILGA expects will result in a binding written agreement, comes after an inquiry in NSW raised concerns about Packer’s influence over Crown and amid royal commissions in Victoria and Western Australia into the casino company’s operations.
In a report tabled in NSW parliament in February, former judge Patricia Bergin found that Crown Resorts was not fit to run the gigantic new casino it has built at Barangaroo, on Sydney Harbour, but set out a pathway for the company to become a suitable operator.
Bergin found that Crown facilitated money laundering that took place at its existing casinos in Melbourne and Perth, and that junket operators who brought in high-rolling gamblers had links to organised crime. She also criticised Packer’s influence over Crown when he was not on the board of the company, which included a secret agreement under which the company shared information with him that was not available to other shareholders, and his close involvement with the VIP gambling division, which handled the junkets.
The ILGA said it reached the agreement “following discussions between the regulator and CPH about the Bergin Report which raised significant concerns over the influence of CPH and Mr Packer, as the dominant shareholder of Crown, on the management and operation of Crown’s Barangaroo casino”.
Under the deal, CPH will not enter into any information-sharing agreements with Crown; will be barred from talking to Crown about its operations “other than through public forums”; will not try to appoint nominees to the board until at least October 2024; and will not seek any amendment to the Crown constitution which would affect the way the company runs its business.
The agreement stops short of requiring CPH to divest any of its 37% shareholding in Crown, although the company is currently subject to a takeover offer by US private equity group Blackstone that would give Packer a way to exit the casino business.