Crown Resorts Rejects ‘Too Low’ $6.5B Blackstone Bid

Posted on: May 17, 2021, 06:23h. 

Last updated on: July 19, 2021, 02:22h.

Philip Conneller @casinoorgphilc Read More
Expertise: Gaming Business, Regulation, Tribal Gaming.

Crown Resorts [ASX:CWN] has rebuffed the takeover advances of US private equity giant Blackstone [NYSE:BX].

Crown Resorts
Analysts believe Crown Resorts, like the one pictured above, is undervalued and will emerge from recent regulatory and pandemic-related turbulence in a strong position. (Image: Lawyerly)

A regulatory investigation into Crown’s much-criticized VIP businesses practices got underway in the State of Victoria on Monday. The Australian casino company said in a statement to the ASX that Blackstone’s A$8.4 billion ($6.5 billion) acquisition bid was too low. This belief was held unanimously by the Crown board, according to the statement.

The rejection shifts the focus onto a rival offer from Crown’s main competitor in the Australian market, Star Entertainment Group [ASX:SGR]. Last week, Star proposed an all-stock merger that values Crown at A$14.00 per Crown share, as opposed to Blackstone’s A$12.35.

An enlarged company would create cost savings that could be attractive to Crown and its shareholders, although the union of Australia’s two biggest operators would create antitrust issues.

In a separate statement to the ASX Monday, Crown said it was still considering the Star offer and had requested more information.

Crown Under Attack

Crown’s value has declined because of the economic fallout from the pandemic, coupled with regulatory turbulence. This includes the recent licensing suitability investigation in New South Wales that saw the company stripped of its Sydney license.

Responding to media accusations, regulators found that Crown’s VIP gambling division did business with junkets that had links to organized crime, and facilitated money laundering.

The company has been told it must improve its governance and corporate culture if it is to be considered for relicensing in New South Wales. It has recently completed the construction of a high-end hotel-casino on the Sydney waterfront.  

But the consensus is that Crown can emerge rehabilitated, post-pandemic, in a position of enviable strength – as the major player in the lucrative gambling market — which is why a firm such as Blackstone sees it as an attractive buy.

‘Belligerence’ in Victoria

But first, Crown must survive a new regulatory inquiry, this time in Victoria, home to its flagship Crown Melbourne property.

Proceedings got off to an inauspicious start for Crown on Monday, when a representative of the Victoria gaming regulator, VCGLR, told a hearing chaired by former judge Ray Finkelstein that he had been persistently lied to by the casino company.

VCGLR compliance officer Timothy Bryant testified that Crown had adopted an attitude of “belligerence” during an investigation into the 2016 arrest of 18 of its staff members by Chinese authorities for illegally promoting gambling in China.

Bryant told the inquiry he was still considering whether to refer Crown to the state’s Supreme Court for its failure to cooperate with the investigation.