Oaktree Capital Management wants to help Crown Resorts buy out its biggest shareholder, James Packer. Crown announced Monday morning that the private equity giant has proposed funding a A$3 billion (US$2.3 billion) deal to acquire Packer’s 37 percent stake.
The deal offers the billionaire the exit route he has sought for several years and a potential entrance, via the back door, for Oaktree into Crown’s ongoing takeover negotiations.
Crown is currently mulling an A$8 billion (US$6.2 billion) full takeover offer from Oaktree’s rival, Blackstone. Oaktree’s proposal would value Packer’s stake at around $12 per share, which is just north of Blackstone’s $11.85-a-share bid.
Oaktree specializes in alternative investment strategies, and its proposal is based on a “structured instrument” involving a mix of debt and equity.
According to The Australian Financial Review (AFR), if the deal were to go through, Crown’s debt to Oaktree could convert over time into a 9.99 percent stake or a 19.99 percent stake. The former would not require probity approval, the latter would. But it would not require Oaktree to make a full takeover bid.
This could be attractive to Crown’s shareholders, as many think it’s a bad time to sell and that the Blackstone offer undervalues the company.
Crown’s share price has declined because of the coronavirus pandemic and the fallout from a damning licensing suitability investigation in New South Wales. That investigation saw it stripped of its Sydney gambling license.
But the interest of Blackstone and Oaktree hint at a brighter future in which a rehabilitated Crown Resorts, with its Melbourne, Perth, and – eventually – Sydney properties, owns the three best casino assets in the region.
A Packer exit could also help with Crown’s rehabilitation with regulators. The New South Wales inquiry concluded the billionaire’s influence on the company has been “deleterious” and had “disastrous consequences.”
Inquiry chair Patricia Bergin, a former judge, criticized a secret information-sharing agreement between Packer and the Crown board that was not available to other shareholders.
She also highlighted his close involvement with Crown’s VIP gambling division, which did business with junkets that had links to organized crime and facilitated money laundering.
Bergin stopped short of demanding Packer sell his shares. But recent regulatory turbulence is a major reason Packer has been willing to do so.
The company founder quit the board completely in 2018, citing mental health issues, and is eager to avoid stress. Previous deals to sell his stake to Wynn Resorts and Melco have fallen through.
But will he be willing to sell to Oaktree?
Not yet, at least according to one prominent Crown shareholder who told The Brisbane Times that “James wants more than $12.”
Last week, the New South Wales regulator said Packer and his personal investment company, Consolidated Press Holdings, had agreed to reduce their influence over Crown.