Takeover approach for Crown Resorts Limited

American private equity management firm The Blackstone Group Incorporated has reportedly lodged a $6.2 billion offer that could see it take over Australian casino operator Crown Resorts Limited.

According to a Sunday report from the Reuters news service, the proposition from the New York-headquartered enterprise comes with an indicative share price of around $9.18, which is roughly about the same rate as was available a year ago before the operator became the subject of coronavirus-related closures and a trio of state-led suitability investigations.

Increasing involvement:

The world’s largest private equity firm, The Blackstone Group Incorporated already reportedly holds a 9.99% stake in Crown Resorts Limited after buying the interest from Melco Resorts and Entertainment Limited a year ago. This purportedly made it the Sydney-listed casino operator’s second-largest shareholder behind only company founder James Packer, who could stand to bank in the region of $2.2 billion for his 36% holding in the entity behind Australia’s Crown Melbourne, Crown Perth and Crown Sydney facilities.

Escalating estate:

Reuters reported that news of the takeover proposal immediately sent the value of individual shares in Crown Resorts Limited up by some 21% to almost $9.28 while its successful completion would see The Blackstone Group Incorporated add to a gambling-related portfolio that already encompasses Spanish casino and bingo hall operator Cirsa Gaming Corporation SA as well as the prestigious 3,950-room Bellagio Las Vegas.

Analytical approach:

However, the news service reported that proposals such as these are often only indicative so as to allow for the possibility of a deal failing to materialize. Nathan Bell from Australian managed funds broker InvestSmart Financial Services Proprietary Limited, which holds shares in Crown Resorts Limited, purportedly proclaimed that The Blackstone Group Incorporated ‘couldn’t get away with a price like this if the casinos weren’t being affected by coronavirus and the management issues at the same time.’

Bell reportedly told Reuters…

“It’s only an opening bid. It’s a messy situation and offering to acquire a casino is a complex affair at the best of times due to all the regulation.”

Further factors:

For his part and John Ayoub from fellow Sydney-headquartered investor Wilson Asset Management seemed to agree after reportedly telling Reuters it was ‘nice to get a bid’ but that the process would now be all about ‘price discovery’. This journey could purportedly be heavily swayed by whether Crown Resorts Limited retains the gambling licenses for its Crown Perth and Crown Melbourne venues after earlier being deemed unsuitable to bring casino games to its new Crown Sydney development.

Ayoub reportedly told the news service…

“These stocks are trading at trough earnings and I wouldn’t be surprised to see further activity in the sector.”