Blackstone Group Proposes a Buyout of Crown Resorts
As the Crown Resorts company continues to struggle, the Blackstone Group Inc. has proposed buying out the company for $6.2 billion.
Crown Resorts has been struggling for quite some time. After being under investigation for months and losing its operating license in Sydney, where it has a brand-new casino property, the company is fading fast. Amidst the struggle, the Blackstone Group Inc. has proposed a buyout deal worth $6.2 billion. This is much lower than the value of the company from a year ago but dictates the struggle that Crown has been going through in recent months.
Will the Company Sell?
Right now, the Crown Resorts company has a troubled reputation. The brand has lost licensing and admitted to possible money laundering activity through its venues. This admission led to further investigations into the company and possibly the potential to lose even more licensing in other areas.
After the proposal was announced, the shares of Crown jumped over 20%. It passed the price of A$11.85 per share from Blackstone as investors hoped a bigger payment could be offered. Blackstone might be willing to pay more, or another potential buyer might come forward.
If the deal was approved, it would help the portfolio of Blackstone grow considerably. The company would have gambling holdings in several areas, spanning the globe from Las Vegas, Nevada to Spain. Crown Resorts has three casinos in cities within Australia that would provide massive opportunity for the company.
The offer by Blackstone was short of the trading levels for the stock market before the COVID-19 pandemic caused issues in the market early last year. The shares of the company recently closed at A$11.97, which is up 21%.
Intelligent Investor has shares in Crown Resorts and portfolio manager of the brand Nathan Bell commented that Blackstone would not be able to get away with its price if the casinos were not affected by both issues involving management and the pandemic.
Bell called it an opening bid and that the situation is message. Blackstone would be acquiring the casino in a complex situation and not at the best time. The board for the Crown has yet to review the proposal and would like to speak with relevant stakeholders as well as gaming regulators on the matter.
Conditions of the proposal include Blackstone being reviewed by regulators and found suitable before they could take over a casino property.
James Packer, the founder of Crown Resorts, and the top shareholder, would earn A$2.9 billion if the deal were to close. He has a 36% stake in the company. Packer has not commented on the proposal at this time.
Crown Resorts is currently in a messy situation. It seems to have begun a few years ago when Packer decided to sell the casinos of the company in the US and Macau, trying to take the company private. This occurred after 18 staff members were imprisoned in China back in 2016 and were accused of being in violation of anti-gambling laws.
By 2019, the company was accused of doing business with junket operators who were linked to organized crime. This revelation led the New South Wales gaming regulators to review the licensing suitability of the company in Sydney. Eventually, the results of that investigation would see the Crown lose its gaming license. A huge casino had just opened in the area, offering a wealth of options, from its hotel to dining, and gaming.
The casino was unable to launch at the beginning due to the inquiry and now it might never get off the ground. To try and gain the license back, Crown decided to let go around half of its board members, including its CEO.
Right now, it seems everything is up in the air. We shall see if the proposal is accepted and what becomes of Crown Resorts in the future.