The Crown Resorts Ltd (ASX: CWN) share price surged this morning as a new major shareholder popped up on its share register.
The Crown share price rallied 7.9% to a one and a half month high of $9.28 at the time of writing. This make the casino operator the best performer on the S&P/ASX 200 Index (Index:^AXJO).
The excitement is spilling over to rival SKYCITY Entertainment Group Limited (ASX: SKC). The stock is third on the leader board as its share price jumped 6.9% to $2.32, while building materials James Hardie Industries plc (ASX: JHX) is the runner up.
Barbarians at the gate
But it’s Crown that’s stealing the limelight after it announced that U.S. private equity firm Blackstone Group Inc bought a 9.99% stake, or 67.7 million shares in the embattled ASX company.
The news is twice as exciting because Blackstone bought all the shares in Crown from Melco Resorts & Entertainment Ltd, which is led by James Packer’s mate Lawrence Ho.
Melco’s holdings turned out to be a double-edged sword for Crown shareholders. It created a lot of excitement and fuelled takeover speculation when Melco made the purchase and said it was keen to buy a further 10% stake.
Crown recovering from a hangover
But the coronavirus crisis scuttled the plan – just as well as experts believe Lawrence Ho would struggle to get regulatory approval to lift his stake – and Crown shareholders woke from the party with a hangover.
Blackstone’s move on Crown not only clears this overhang, but it gives investors confidence in the value of Crown’s shares, which collapsed 35% over the past year before today’s surge.
The new acquirer paid $8.15 a share (or $552 million), which represents a relatively skinny discount of 5.2% to Crown’s closing price on Tuesday.
The private equity group is a large investor in real estate and Crown is sitting on some valuable pieces of land in Australia.
Is Crown a takeover target?
The question now is Blackstone’s next move. There will be plenty of speculation on whether the giant investor will seek to make a takeover bid or be happy to sit pat.
If I had to guess, I would say that private equity buyers seldom like to invest in companies where they don’t have management control. I think there’s another chapter to this story.
Crown has long been seen as a takeover target due to its poor share price performance, which some argue doesn’t reflect the value of its unique assets.
There was even talk a few years ago that James Packer (a major shareholder and ex-chairman of Crown) would launch a management buyout and take the group private.
Casinos have been badly hit by the COVID-19 pandemic as entertainment and hospitality venues were forced to shutter to contain the outbreak.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
The Motley Fool Australia has recommended Crown Resorts Limited and Sky City Entertainment Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
- Why this ASX miner that’s missing the rally is one of my key picks for FY21 – August 5, 2020 12:37pm
- Meet the ASX-listed property stock with a 9% yield for FY21 – August 5, 2020 10:03am
- This is the only ASX sector tipped to report earnings growth this reporting season – August 4, 2020 5:25pm