Internal battles for control of Australian gaming giant Crown Resorts have now reignited, following a ruling by a royal commission last month which stated the company should keep its prized Melbourne, Victoria casino license. A new $6.2 billion takeover offer from private equity outfit Blackstone, Crown’s second-biggest shareholder with 9.99% of its shares, was revealed on Friday.
While Steve McCann, Crown’s chief executive, said the business was considering the proposal, he also talked up the group’s recent improvements, reports The Sydney Morning Herald. “We have a strong recovery plan, we are overhauling our culture and are on a pathway towards industry best-practice governance and compliance,” he said.
Crown is now seen as finally embarking on a recovery path, following a damaging three years in which scandals and public inquiries threatened its licenses in Melbourne, Sydney and Perth. According to McCann, reforms have now led to “fundamental changes” that have “strengthened and enhanced” the value of the business.
Blackstone Group’s latest proposal supports this: it marks the third offer from the firm and the highest one. The firm is now firmly positioned in the battle to win control of Crown, as rival bidder Star Entertainment Group has backed off its own proposal deal citing regulatory uncertainty, as it now faces its own misconduct allegations.
While unconfirmed if Blackstone’s bid will be accepted, the news alone helped push Crown’s shares 17% higher. Crown had previously favored Star’s buyout approach over earlier Blackstone proposals, reports Reuters, but the company’s own troubles are likely to derail any attempt to reopen talks. Moreover, Blackstone’s proposal is seen as matching Star’s cash option.
A spokesperson for Blackstone has confirmed the offer to local media, while declining to comment. The proposal is seen as a natural reaction to the business retaining its Victorian license, but some experts suggest Blackstone could be undervaluing Crown. Crown said its board will consider the bid.
The operator took a big step towards recovery last month, when the most consequential of the inquiries it faced, which threatened to withdraw the gambling license in its flagship Victoria venue, ultimately led the company to keep operating under supervision.
While a royal commission found the business unsuitable to run the venue due to repeated “illegal” and “dishonest” conduct, Crown was allowed to retain its license on the basis of preventing harm to the Victorian economy and third parties. The government is appointing a “special manager” to oversee all operations, who may decide to remove the license after two years if the gaming giant is found unfit to hold it.
However, Crown isn’t yet cleared from public scrutiny: the company is still facing a public inquiry into governance and anti-money laundering compliance at its second-biggest earning casino, in Western Australia state, plus a federal anti-money laundering investigation.
Crown is led by billionaire media heir James Packer, who owns 37% of the business, and is set to be a decisive figure in any takeover deal. According to Sydney Morning Herald, a spokesman for his private company, Consolidated Press Holdings, said it was aware of the new Blackstone offer and was “awaiting further announcements and details for consideration.”
Blackstone has reportedly told Crown it was prepared to push ahead with the transaction even if Crown’s Sydney license, currently suspended, remains in this state. However, the firm would pull the pin if any of the operator’s three licenses are canceled outright.