The Crown Resorts Ltd (ASX: CWN) share price is ascendant today after a bid by Blackstone to buy the company. At the time of writing, shares in the company are trading at $11.61 – up an incredible 17.75%. By comparison, the S&P/ASX 200 Index (ASX: XJO) is up just 0.31%.
After a few months to forget for Crown, which began when the New South Wales Independent Liquor and Gaming Authority (ILGA) found the company unsuitable to hold a gaming license in the state, swiftly followed by a slew of resignations, including the CEO and several directors, and a royal commission to the granting of the license in Victoria – the news of a Blackstone takeover bid is very welcome for investors in the hospitality giant.
Blackstone wants to claim the Crown
In a statement to the ASX, Crown announced private equity group, Blackstone Group Inc, sent an unsolicited bid to the board to buy all the shares in the company.
Blackstone is offering $11.85 per share, which represents a 19% premium to the volume-weighted average price of Crown shares since the release of its H1 FY21 results.
The proposal is still in its early stages. Several more steps must be taken before any deal is finalised, including:
- Due diligence.
- Arranging debt finance.
- A unanimous agreement by the board to recommend accepting the deal.
- Blackstone being found suitable to hold the Crown gaming license in Sydney, Melbourne, and Perth.
- Approval from the Blackstone investment committee.
Blackstone already owns approximately 10% of shares in Crown Resorts.
Crown has appointed UBS as financial advisors and Allens as legal advisors in the matter. The board did not indicate its position on the bid.
Why Crown might want to sell to Blackstone
The ILGA report found Crown was culpable of "facilitating money laundering, exposing staff to the risk of detention in a foreign jurisdiction and pursuing commercial relationships with individuals with connections to triads and organised crime groups…"
CEO Ken Barton, director Andrew Demetriou, and board member John Poynton all resigned in the wake of the devastating findings. According to the Sydney Morning Herald, Mr Poynton was the last of the James Packer aligned members of the board to resign. The ILGA report heavily impacted Mr Packer.
The decision in NSW also prompted the Victorian and WA Governments to review whether Crown should have been granted a gaming license in their jurisdictions at all.
Crown share price snapshot
Despite all its recent troubles, the Crown share price is still almost 80% higher than this time last year. Of course, late March last year represents the very worst of the coronavirus-induced market selloff. The virus, and associated government restrictions, heavily impacted Crown's operations, along with those of most other ASX-listed companies.
The Blackstone offer to buy Crown shares at $11.85 would represent the highest price Crown shares have been at since 14 February 2020. Back then, the share price was $11.90 and it was pre-pandemic.
