Oaktree Capital Ups Stakes in $2.39B Bid for James Packer’s Crown Shares

Posted on: June 15, 2021, 07:58h. 

Last updated on: June 15, 2021, 09:59h.

Oaktree Capital is determined to help Crown Resorts buyback billionaire founder James Packer’s shares, while nabbing some equity for itself in the process.

James Packer, seen here, has largely withdrawn from business life, citing mental health problems, and is understood to be willing to sell for the right price. (Image: Sky News)

The private equity group has reaffirmed its interest in Australia’s biggest casino company with an offer of A$3.1 billion ($2.39 billion USD) in financing. This would take the form of one A$2 billion private loan and a A$1.1 billion loan convertible into new shares.

This deal would allow Crown to acquire Packer’s 37 percent and give Oaktree a ten percent stake in the company.

This is a slight increase on the A$3 billion in funding it offered Crown two months ago as part of a similarly structured deal.

Crown said in a filing to the ASX that it had “not yet formed a view” on the merits of the new Oaktree proposal.

Crown Undervalued

The offer represents an alternative strategy to the two bids also on the table from Star Entertainment and the Blackstone Group. It may well be appealing to those shareholders who are reluctant to sell Crown in its entirety because they believe it is undervalued.

The economic fallout from the coronavirus pandemic and Crown’s recent regulatory troubles have hit the company hard, but analysts predict a brighter future. After all, that’s why some of the smartest people in the private equity sector are currently knocking on the door.

Star is the Crown’s primary competitor in the Australian market. The company has offered an all-stock buyout of A$9 billion ($6.9 billion), while Blackstone recently increased its all-cash bid to A$8.4 billion ($6.4 billion), having been knocked back by the Crown board.

Packer, 53, has been willing to sell for some time. The billionaire has largely withdrawn from business life because of mental health issues and is understood to be waiting for the right price.

Regulatory Pressures

But Packer’s influence on Crown was subject to criticism during the Bergin Inquiry, a months-long suitability examination that ultimately stripped the company of its Sydney gaming license.

Chair Patricia Bergin, a former judge, criticized Packer’s oversight of Crown’s VIP gambling division. The inquiry concluded it did business with junkets that had links to organized crime while facilitating money laundering.

She also criticized a secret information-sharing agreement between Packer and the Crown board that was not available to other shareholders.

Crown is currently facing an additional suitability investigation in Victoria, home to its flagship Melbourne property.

Meanwhile, Australia’s financial intelligence unit, Austrac, recently reported that it had broadened its anti-money laundering investigation to include Crown’s Perth property. It has been investigating the Melbourne property since October of last year.

It is also looking into Star Entertainment’s Star Casino Sydney and SkyCity Adelaide, owned by New Zealand’s SkyCity.