Why the Crown (ASX:CWN) share price grew at triple the rate of the ASX 200

One takeover bid in, one takeover bid out, and controversy continues. The wild ride that was Crown shares in May.

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A crown sits on a pile of money, indicating the richest people

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During May, the Crown Resorts Ltd (ASX: CWN) share price grew 6.4%. Compared to the S&P/ASX 200 Index (ASX: XJO) rate of 1.9%, it’s a fairly impressive figure. At one point last month, Crown shares were trading for a 52-week high of $13.32.

While the sparkle may have come off the Crown at the beginning of the year, shareholders may now be feeling like they are the kings of the world.

Let’s take a look at some of the big stories that affected the Crown share price last month.

What affected the Crown share price in May?

Star merger proposal

The biggest story of the month was the proposed $12 billion merger by Star Entertainment Group Ltd (ASX: SGR). The news sent the Crown share price rocketing 7.3% over the course of that day.

Star offered shareholders in the rival gaming company 2.68 Star shares for every one share in Crown. Star says it believes its pro forma share price, once merged, would be around $5 per unit. This would value Crown shares at $14 each – a 15.5% premium at the time. Star also submitted an alternative proposal of $12.50 cash for each Crown share.

Star management said if the merger did materialise, it would result in “significant scale and diversification and unlock an estimated $2 billion in net value from synergies.” At the last update, the Crown board said it was considering the proposal and would evaluate it in due course.

Blackstone bid rejected

Blackstone Group Inc (NYSE: BX), the private equity firm that started the bidding war for Crown, had its offer for the company rejected in May. The Crown share price ended that day only 0.8% higher. That, however, came on the back of the previous trading day, where share value increased 2.3%.

Blackstone revised its bid twice in response to interest from other parties. The Crown board, however, was not impressed. It unanimously rejected Blackstone’s proposal, saying it “undervalued” Crown and was submitted after the company announced a record loss because of the COVID pandemic and before it enacted a plan to pay off a significant amount of debt.

Victorian royal commission heats up

In news that sent the Crown share price into the red, it was reported the Victorian royal commission into the Crown licence may come up with adverse findings, just as NSW did in February.

During opening statements at the hearings, counsel assisting, Meg O’Sullivan, said alleged money laundering through the company may be worse than first thought. O’Sullivan also said Crown may have misled the NSW Bergin inquiry by underplaying a “review of the company’s bank accounts.”

Crown shares fell 0.54% between then and the end of the month. While that does not seem like a lot, one should remember the ASX 200 increased over the same period.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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