Blackstone unlikely to win Crown at current offer price: J.P. Morgan

Crown logo

Blackstone is unlikely to win approval from Crown Resorts’ board or shareholders with its current A$11.85 bid, J.P. Morgan analysts wrote in a note.

The U.S. private equity firm, which already owns a 9.9% stake in Crown, has offered to buy the Australian operator for $8 billion ($6.2 billion).

Crown has long been seen as a potential takeover target after several unsuccessful attempts at mergers in recent years. One with Melco Resorts & Entertainment, which sold its 9.9% stake to Blackstone for $8.15 a share and another with Wynn Resorts in 2018 when the U.S. operator walked away from talks after they became public. Wynn was offering $14.75.

Now, Crown’s shares are depressed given the double whammy from the Covid crisis and Crown’s regulatory woes, which include being found unsuitable to hold a casino license for its new property in Sydney, and Blackstone has seen its chance to pounce.  

“Based on where CWN (and SGR) were trading prior to COVID-19 (and with the upside potential of Barangaroo) our initial view is A$11.85/sh would be insufficient for approval from shareholders and the board,” J.P. Morgan said. “CWN’s share price is discounted from the pending Royal Commissions, and this bid indicates Blackstone’s valuation for the real estate assets (with the casino licenses as risk-adjusted upside). 

The firm notes that Blackstone’s bid is highly conditional and will also depend on Australia’s notoriously lengthy probity process, which can last up to three years.    

It suggests that potentially, Star Entertainment could step in to manage the casino, which may ease the way.

Reuters’ Breakingviews notes that the bid is a win/win for Blackstone. It argues that the offer may be an attempt to flush out other potential suitors, who would come in at a higher price.

If so, Blackstone would stand to make a handsome return on the price it paid for its own stake and if not, it buys Crown’s assets at a cheap price.

The obvious candidate for an alternative bidder is Las Vegas Sands, which is sitting on a $6 billion cash pile after selling its Las Vegas assets. The firm has said it is looking for growth opportunities and is focused on the Asia Pacific region.

Crown’s stock jumped 21 percent in Monday’s trading to close above the bid price at $11.97, indicating there is an expectation that the story does not end here. 

 

Related Articles

Crown-Melbourne

Victoria probe told Crown official lied about China arrests

A Royal Commission investigating Crown Resorts in the Australian state of Victoria was told by a compliance officer from the regulatory authority that the company lied to him about the arrests of its employees in China in 2016.
Crown Resorts

Crown rejects Blackstone’s buyout proposal

Australia-listed Crown Resorts on Monday said it has formally rejected a takeover offer from U.S. private equity firm Blackstone, saying the proposal undervalues Crown and is not in the best interest of Crown's shareholders.
Crown resorts

Crown / Star monopoly a small price to pay

A combined entity consisting of The Star Entertainment Group and Crown Resorts would create a behemoth gaming enterprise not just in Australia, but in the wider Asia gaming market, though market observers have flagged a number of regulatory hurdles that could hinder it from ever becoming a reality. 
Crown logo

Opportunistic Crown bidders will stumble: JP Morgan

Opportunistic bidders hoping to capitalize on fears that Crown won’t be granted a NSW license may have to reassess what they’ve put on the table, following an ILGA announcement that Crown would be on track to open its Sydney casino operations by October.

Star/Crown to cease junket ops. and go cashless

Australian operators, Star Entertainment and Crown Resorts have both agreed with regulators in New South Wales to cease all international junket operations and to go cashless in their casinos.
Crown Barangaroo

Crown on track for Sydney casino operations by October

Crown Resorts is making "significant" progress in addressing concerns raised by the Bergin inquiry and has agreed a series of steps with the regulator.
Blackstone makes A$8 billion bid for Crown Resorts

Victorian Royal Commission on Crown to examine 2016 arrests

The Victorian Royal Commission into Crown Resorts is set to launch next Monday, opening with an examination into the arrests of Crown staff in China in 2016. 
Hong Kong, Crown resorts

HK real estate firm could throw hat in ring for Crown

Sources are pointing at another potential suitor for Crown Resorts’ shares, Hong Kong-listed CC Land Holdings. 

The Star enters race for Crown, proposes $12 billion merger

Australian casino operator The Star Entertainment has officially entered the race for Crown Resorts, proposing a $12 billion mega-casino merger. The company believes a merger with Crown represents a compelling value proposition for all shareholders by delivering between $150 million to $200 million if cost synergies per annum.
Crown-Sydney-Property

Blackstone ups bid for Crown

Private equity firm Blackstone has revised its proposal to buy out all of the shares in Crown, with a $12.35 cash per share bid, representing a $0.50 increase from its initial offer made in March this year.