Blackstone Ups Its Crown Offer

blackstone logo

Private equity heavyweight Blackstone has ramped up its Crown Resorts takeover offer, vouching to inherit the embattled casino operator’s regulatory headaches if a deal can be agreed.

The Financial Review reports that Blackstone’s $11.85 a share bid can be on the table by August, after making an important change to regulatory conditions attached to its indicative offer.

Blackstone wrote to Crown to say it was willing to take on the casino group’s regulatory risks.

So long as Blackstone can gain regulatory approvals to own 100 per cent of Crown from three state-based gaming authorities and provided Crown is not stripped of its licences in the meantime, it will proceed with its bid.

In effect, Blackstone is saying that it doesn’t matter what plays out in Victoria or Western Australia, where royal commissions are underway, or what findings are made against Crown in its present form.

Its bid’s regulatory condition is now about what’s happening in its own camp, not Crown’s.

The underlying message is that Blackstone is confident it can pass probity with the regulators, given its track record as an asset manager globally.

The firm started the process in each state late last year and reckons it should be able to gain clearance in the coming months.

The process is understood to focus on Blackstone and the dealmakers it has lined up to oversee its proposed Crown investment.

Crown said Blackstone expected to receive probity approval to acquire 100 per cent of Crown in each state by the third quarter of this year.

Blackstone’s tinkering is designed to show Crown shareholders that it is serious about buying them out of uncertainty that could otherwise hang over Crown for years.

It also looks like an attempt to get Crown’s board to engage on the offer.

Blackstone, advised by Morgan Stanley and Clayton Utz, lobbed its $11.85 a share indicative bid in March.

Crown appointed UBS and Allens for advice and is assessing the proposal.

The bid was also made subject to due diligence, Crown board approval, entry into a scheme of arrangement and other procedural elements that are customary in private equity bids for Australian listed companies.

Crown shares were up three cents to $12.011 on Tuesday morning on the back of the news.

Blackstone’s offer for Crown faces a number of hurdles

Crown resorts logo

As Crown Resorts received its first takeover offer from private equity firm Blackstone, the ABC reported in early April that any takeover bid faces numerous hurdles, including negotiating a fair sale price.

Crown said its board had not yet formed a view on the merits of Blackstone’s proposal and would start a process to assess it.

A proposed takeover bid faces numerous hurdles and regulatory risks, including several inquiries into Crown by state-based regulators, looming class actions and financial regulator AUSTRAC investigating Crown for potential breaches of Australia’s anti-money laundering and counter-terrorism financing laws.

Blackstone, which manages A$800 billion of assets globally, already owns about 10 per cent of Crown.

The private equity firm has been operating in Australia for 11 years and has invested $14 billion across Australia and New Zealand, predominately in commercial and industrial real estate.

It has a team of about 30 people employed locally.

Blackstone not new to casino acquisitions

Private equity funds take investments from wealthy individuals or other fund managers to buy distressed businesses or discounted assets on the cheap.

They then usually either turn the business around and resell it or split it up and sell the most valuable assets for a profit.

Blackstone sees an opportunity in acquiring Crown’s property assets and has likely weighed up the regulatory risks it knows of so far.

But the offer is at this stage just indicative and non-binding.

This means it is subject to a number of conditions, including making sure the casino is deemed fit and proper to hold its casino licences in Sydney, Melbourne and Perth.

There will also need to be a unanimous recommendation from Crown’s board and a commitment from all Crown directors to vote in favour of the proposal, as well as approval from Blackstone’s investment committee.

William Brown

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