Crown Resorts Rejects Takeover Bid by Blackstone
Crown Resorts has decided to reject a bid of $6.5 billion by Blackstone, a private equity company in the US that wishes to take over the company.
In a recent statement to the ASX, Crown Resorts has announced that a deal by Blackstone to acquire the company at A$8.4 billion ($6.5 billion) is too low. The board is unanimous that the amount is far too low for the bid to be considered. Star Entertainment Group also recently bid on the company, proposing an all-stock merger at A$14.00 per share. The deal would be better than the Blackstone share price bid of A$12.35.
Is It Too Low?
Crown may have rejected the Blackstone bid, but they are still considering the offer by the Star. Should the company hold out for more money? Crown Resorts has been in hot water for quite some time, and eventually the issues may push the value of the company down considerably.
The value has already declined due to the economic issues surrounding the pandemic, along with regulatory issues. The company has been investigated in New South Wales and eventually lost its gaming license for a new venue in Sydney because of what was found by regulators.
Investigations began against the Crown due to accusations by the media that the operator was conducting illegal activities. The investigation by regulators found that the VIP gambling sector of the company conducted business with junkets that were connected to organized crime. Money laundering was prevalent and a big reason as to why the company is facing scrutiny today in other areas.
While the company did lose its license, the Sydney Resort should be able to offer gaming again soon. Crown Resorts agreed to a complete overhaul and is working towards meeting the requirements in order to provide gaming at the new venue.
It has been estimated that the casino will be up and running possibly by the end of October. Crown Chairman Helen Coonan has created a plan to change up the board, improve governance and tighten up controls connected to anti-criminal needs.
The changes reduce the risk involved for a new company that might take over Crown Resorts. Despite all this, Blackstone still thinks the company is a wise investment. They are a major player in Australia and would give the company a foot in the door so to speak. But how much will the Crown take for Blackstone to become the new owner, and will the company pay up?
The decision to reject the bid comes at the same time as Crown Resorts is under investigation in Victoria. Proceedings started yesterday and it did not begin well for the company. The Victoria gaming regulator sent a representative to the meeting who said that he was lied to by the Crown.
Timothy Bryant is a compliance officer for the regulator who said the Crown was belligerent during an investigation connected to the arrest of 18 employees back in 2016 in China. Bryant said during the hearing that he is still contemplating whether or not he should refer the company to the Victoria supreme Court due to failing to cooperate during the investigation.
The inquiry process will be ongoing for quite some time in Victoria, and it is unclear as to what the outcome will be. The result may be similar to the one in New South Wales. However, now, Crown Resorts has made significant strides in cleaning up its act and the positive changes may help to reduce any type of penalty the company may face involving this recent inquiry.
We shall see how the next few days unfold. Will there be another offer from Blackstone? Will the Victoria inquiry result in a revoked license or other specific changes within the major gambling company?