Blackstone rolls the dice with $6.2 billion move on Australia’s Crown

By Byron Kaye and Rashmi Ashok

SYDNEY (Reuters) – Blackstone Group (NYSE:) Inc proposed a buyout of Australia’s Crown Resorts Ltd in a deal valuing the casino operator at $6.2 billion, a markdown from the troubled company’s value a year ago but a possible reprieve from regulatory pressure.

Crown shares leapt more than 20% after it disclosed the informal offer on Monday, passing Blackstone’s indicative price of A$11.85 as investors wagered a bigger payment could be in the offing from the world’s No. 1 private equity firm or another suitor.

“It’s nice to get a bid, and now it’s about price discovery,” said John Ayoub, a portfolio manager at Wilson Asset Management, which has Crown shares.

“These stocks are trading at trough earnings and I wouldn’t be surprised to see further activity in the sector.”

If Blackstone’s takeover were to succeed, it would round out a portfolio of gambling-related assets from Las Vegas to Spain with resorts in three Australian cities.

But it would get a company in crisis after Crown lost its licence to operate a flagship new casino on Sydney’s waterfront last month amid allegations of money laundering and links to organised crime.

It also faces inquiries in the other two Australian states where Crown is licensed to operate.

Australia’s financial crimes agency meanwhile is investigating Crown over money-laundering allegations, and the company faces two civil lawsuits accusing it of failing to disclose risks which led to share price declines.

Blackstone’s indicative offer was short of the stock’s trading levels before concerns about the coronavirus caused market gyrations in early 2020.

Crown shares closed up 21% at A$11.97. Investors often trade below an indicative offer price to allow for the possibility of a deal failing to eventuate.

“Blackstone couldn’t get away with a price like this if the casinos weren’t being affected by COVID and the management issues at the same time,” said Nathan Bell, portfolio manager of Intelligent Investor, which has Crown shares.

“It’s only an opening bid. It’s a messy situation and offering to acquire a casino is a complex affair at the best of times due to all the regulation.”

Crown said its board had not yet formed a view on the proposal but would talk to “relevant stakeholders including regulatory authorities”.

Company founder James Packer, the top shareholder with a 36% stake, would receive about A$2.9 billion from the deal.

Packer declined to comment. Blackstone, Crown’s second-largest shareholder with 9.99%, confirmed the approach but declined to comment further.

BAD TO WORSE

Packer sold out of casinos in Macau and the United States and began a series of attempts to take Crown private after 18 staff were jailed in China in 2016 for violating anti-gambling laws.

Three years later media…