Crown board unanimously backs Blackstone's $6.3B buyout offer; James Packer would see an exit

Gaming giant Crown Resorts has agreed to a takeover offer from US private equity firm Blackstone, according to an ASX filing by the Australian operator. The company’s board is unanimously backing the A$8.9 billion ($6.3 billion) buyout offer, 10% higher than a previously rejected one, and has recommended shareholders vote in favor.

The statement explains Crown Resorts Limited has entered into a “scheme implementation deed” with a company on behalf of funds managed and advised by Blackstone Inc. and its affiliates, under which Blackstone will acquire all of the shares in Crown at a price of A$13.10 cash per share.

Blackstone is already Crown’s second biggest shareholder, with a 9.9% stake, and has been stalking the company for almost a year. The new scheme values Crown’s equity at approximately A$8.9 billion and represents an increase in equity value of more than A$845 million ($599.5 million) to the price of A$11.85 cash per share initially offered by Blackstone in March 2021.

The transaction is subject to various conditions, but the Crown board is “unanimously” recommending that shareholders vote in favor of the offer “in the absence of a superior proposal.” An independent expert has concluded, and continues to conclude, that the scheme is in the best interests of shareholders, according to the filing.

Subject to the expected timing of regulatory approvals, a scheme meeting is expected to be held in the second quarter of calendar year 2022. According to the Crown board, the proposal is consistent with its commitment to maximize value for shareholders.

“The Crown Board and management have made good progress in addressing a number of significant challenges and issues emerging from the COVID-19 pandemic and various regulatory processes,” said Crown’s Chairman, Ziggy Switowski. “Nevertheless, uncertainty remains and having regard to those circumstances and the underlying value of Crown we believe the Blackstone transaction represents an attractive outcome for shareholders. The all-cash offer provides shareholders with certainty of value.”

Ziggy Switowski, Crown's Chairman

Crown’s Managing Director and Chief Executive Officer, Steve McCann, also backed the offer in a written statement, in which he claims the announcement represents “a compelling offer” for Crown’s shareholders to consider.

“The price appropriately reflects the value of Crown's world-class assets and global reputation for premium service and experiences,” McCann said. “The agreement with Blackstone also highlights the strength of the Crown brand and confidence in our future as we emerge from some challenging times, which is welcome news for our people, customers and stakeholders.”

The current arrangement builds upon a March 22, 2021 offer from Blackstone to acquire the company at a price of A$11.85 cash per share. The proposal was afterward revised at a price of A$12.35 cash per share on May 10, 2021; and subsequently modified to A$12.50 cash per share on November 19, 2021.

However, Crown shortly after, in December, announced the board viewed the proposal as not representing compelling value for shareholders. Nevertheless, the board resolved to offer the US equity firm the opportunity to access non-public information “to allow Blackstone to undertake initial due diligence inquiries” on a non-exclusive basis so that it could formulate “a revised proposal that adequately reflected the value of Crown.”

As a result, Crown announced on January 13, 2022 that it had received a further revised proposal for A$13.10 cash per share, on terms and conditions consistent with the proposal announced on November 19, 2021. Following completion of due diligence and negotiations in relation to binding documentation, Crown has now entered into the implementation deed with Blackstone.

The transaction is subject to a set of conditions, including an independent expert having issued a report which concludes the scheme is in the best interests of shareholders; approval of Australia’s Foreign Investment Review Board; approval from pertinent Gaming Regulatory Authorities; and no gaming regulatory event or material adverse changes occurring.

Blackstone has already lodged applications with FIRB, Gaming Regulatory Authorities and “the relevant counterparties” to the transaction. Going forward, Crown intends to send an explanatory booklet to its shareholders in March or April of the current year, which will contain information relating to the agreement, and the independent expert’s report.

James Packer, Crown's biggest shareholder

A meeting on the proposed scheme is expected to be held in the second quarter of calendar year 2022 and, if approved, it would be implemented “shortly thereafter.” If completed, the takeover transaction would give high-profile billionaire James Packer an exit from the Australian giant, bringing an end to his era in the company.

Blackstone, which already owns around 10%, is set to take over the company amid a period of intense regulatory scrutiny after investigations found Crown has allegedly knowingly dealt with criminal organizations. This has resulted in its gambling license for its flagship Sydney casino remaining suspended more than a year after it was due to open, while its Melbourne casino has been allowed to operate but with a government-appointed supervisor for two years.

As Crown's biggest shareholder with 37% of the company, Packer's vote will be pivotal to reach the 75% shareholder approval threshold, reports Reuters. He is expected to give the takeover bid his blessing, according to Australian media. He would receive about A$3.26 billion ($2.3 billion) from the sale.