Shares in Crown Resorts Ltd (ASX: CWN) have rocketed around 14% to $12.15 this afternoon after Bloomberg and The Australian reported that some of the casino group's assets may be sold into private ownership.
Crown is currently valued at around $7.7 billion with its flagship asset and main earnings driver being the Crown Resorts and Leisure complex in Melbourne, while it also has a casino in Perth and joint venture partnership in Macau under the name Melco Crown Entertainment.
The stock has been on the nose over the last year as its Melco Crown casinos in Macau suffered dwindling revenues after Chinese government restrictions reportedly cracked down on the large flows of money into the gambling capital of Asia.
Both Bloomberg and The Australian are reporting that Packer may be interested in selling off part of the assets to private equity bidders with the struggling Macau operations a potential target for overseas private equity bidders benefiting from a tumbling Australian dollar.
Crown also has big ongoing development projects in Sydney and Las Vegas among other regions. The success of which will be critical to the long-term health of the business. For Packer private funding may seem attractive rather than letting the stock trade at public valuations perceived to be less than the true equity in the business.
Moreover, at the end of June 2015 Crown had about $2.7 billion worth of debt or $2.3 billion of net debt with the costly construction projects ongoing. Mr Packer then may be looking to deleverage a stretched balance sheet after the share price sunk 31% since February 2015, with his chums in private equity coming to the rescue.
This seems good news for investors as much of the share price weakness was based on the assumption that the business may have become overstretched and the private equity investors are perhaps either happy to invest now with the aim of offloading later at a higher valuation, or to pick off a few select assets at what they see as compelling value given the share price weakness and tumbling Australian dollar.
