An $8 billion offer for gaming giant Crown Resorts from a US investment fund could be good news for shareholders of the troubled group, according to a market expert.
U.S. private equity group Blackstone has made an unsolicited, non-binding offer of $11.85 cash per share.
The offer represents a premium of 19 per cent to Crown’s weighted average share price in the weeks since it released its first-half results.
Shares in the casino group were surging on Monday by 18.26 per cent to $11.66 at 1255 AEDT on Monday.
CMC Markets Chief Market Strategist Michael McCarthy said shareholders may see benefit in new ownership, after the group’s struggle to retain casino licences.
“Some shareholders are probably a little weary of the hits that keep coming,” he said.
“So some might see a change of ownership as positive for those regulatory issues.”
A New South Wales (NSW) report in February required Crown make substantial changes if it was to continue holding its licence, because it had allowed money laundering.
Five directors resigned in the aftermath, and royal commissions are set for Crown’s operations in Perth and Melbourne.
McCarthy said a bid for the company was not surprising given how much its share price had fallen.
Crown shares traded as high as $12.71 early last year, before an inquiry into its finances resumed, and the pandemic took hold.
ThinkMarkets analyst Carl Capolingua said the Blackstone bid looked cheap.
“It looks like a low ball offer,” he said.
Capolingua cited Las Vegas gambling giant Wynn Resorts’ offer in 2019 of $10 billion.
Wynn called off talks, saying the preliminary talks had been revealed too early.
Capolingua said the premium Blackstone was offering on shares may later be increased.
“You never put your best offer on the table first,” he said.
Blackstone already holds 9.99 percent of Crown, which it bought from Melco Resorts & Entertainment in April last year for $8.15 per share.
Yet the chief investment officer of stockbroker Shaw & Partners, Martin Crabb, said the bid could actually be a ploy to attract interest from casino operator Star Entertainment.
Star operates Sydney’s only casino, and could be well-placed to take the licence from Crown for the city’s second casino, which is yet to open at Barangaroo.
Crabb said Blackstone may be trying to draw Star into a bidding war.
“The question is whether this bid is a ploy by Blackstone about flushing out a competing bid from Star, rather than Blackstone actually wanting to own the assets,” he said.
A Star bid would be good news for Blackstone and other shareholders.
“Blackstone would get a high price for their shares,” Crabb said.
“So it’s high stakes game theory.”
Crabb also wondered whether the bid had been discussed with Crown’s largest shareholder, James Packer, prior to it being tabled.
“You would imagine he is supportive,” he said.
“You would want to make sure the largest shareholder will accept the bid. James Packer has made clear he wants to divest his holding.”
Blackstone’s indicative offer carries a number of conditions, including that it be recommended unanimously by the Crown board.
It also wants regulatory confirmation a future Blackstone-owned Crown is deemed a suitable person to hold the target’s Sydney casino gaming licence.
Crown said its board was yet to form a view on the merits of the proposal.