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Blackstone inches closer to taking out Crown: Will Star lob in a counteroffer?

By Market Index
Thu 13 Jan 22, 11:45am (AEDT)

Key Points

  • Blackstone already owns 9.99% of Crown
  • Packer needs to sell down to below 5% by 2024
  • Ord Minnett has a Buy rating and $15 target price

Crown Resorts (ASX: CWN) was up 8.04% in early morning trade following revelations that its suitor, US-based alternative investment manager, Blackstone has lifted its bid offer to $8.9bn.

Having been granted a closer sniff at Crown’s books, Blackstone’s new all-cash bid is now $13.10 per-share. It remains to be seen if one-time rival bidder Star Entertainment (ASX: SGR) will stage another crack at taking out Crown.

Based on the provisio that there are no better offers, and Blackstone - 9.99% shareholder - advancing a binding agreement, the revised bid already has the interim approval from the Crown board.

Green light

To help facilitate a binding offer from Blackstone, Crown has given the investment manager the green light to finalise its due diligence inquiries and negotiate the terms of an Implementation Agreement.

However, the board’s final approval is also contingent on conclusions from an independent expert report that the takeover is in the best interests of Crown investors, including James Packer who owns 37% through his company Consolidated Press. 

Blackstone also needs to receive final approval from casino regulators in Vic, NSW, and WA.

In light of Woolworth Group's (ASX: WOW) surprise decision to drop it's bid for Australian Pharmaceutical Industries (ASX: API), investors should note how easy it is for these deals to fall over.

Packer to exit

Much of Crown’s attractiveness to any offer can be attributed to 24 months of intense regulatory scrutiny, which declared the casino operator unfit to run a casino in NSW and barred it from opening its new Barangaroo casino until it is suitable.

However, it’s understood that Crown is targeting gaming floor openings early this year, while dialogue with the regulator over the Sydney licence continue.

As a result, Consolidated Press Holdings business, needs to sell down to below 5% by 2024 to appease regulators.

Fallout from the regulatory scrutiny in NSW has also triggered similar inquiries into Crown’s activities in Vic and WA.

Market talk suggest Consolidated Press and other major shareholders may not be on the same page, with Packer having allegedly hinted that a price of about $15 per share is more appropriate for Crown.

Based on the current share price ($12.56), Crown has a market capitalisation of $8.4bn, and is ranked 70 on the ASX100.

What broker’s think

  • Ord Minnett Buy rating and $15 target price (14/12/21) are unchanged.

  • Macquarie’s Neutral rating was retained, and target rose to $12.20 from $10.40 (07/12/21).

  • Credit Suisse expected a new bid to be lifted to $13.00 and raised its target to that price, up from $9.80, and upgraded to Outperform (26/11/21).

Consensus on Crown is Moderate Buy.

Written By

Market Index

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