The Crown Resorts Ltd (ASX: CWN) share price is recovering on Wednesday despite concerns that potential AUSTRAC fines could impact the $8.9 billion takeover offer from private equity firm, Blackstone.
The casino operator's share price dipped yesterday after AUSTRAC announced it is pursuing civil penalties against Crown in the Federal Court.
The watchdog claims Crown failed to comply with anti-money laundering and counter-terrorism financing laws.
At the time of writing, the Crown share price is $12.42, 0.4% higher than its previous close. For context, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.19%.
Let's take a look at what the proceedings might mean for the planned takeover.
Image source: Getty Images
Could this impact the $8.9 billion Crown takeover?
The AUSTRAC investigation was addressed in the takeover's implementation deed. It states that any fine given by AUSTRAC is seen as a 'prescribed regulatory event' and thus, won't be treated as a 'material adverse change'.
However, according to reporting by The Australian, if fines handed to Crown total more than $750 million, Blackstone will be able to walk away from the takeover unscathed.
Blackstone declined to comment on the matter.
The case filed against Crown alleges Crown Melbourne breached Australia's anti-money laundering and counter-terrorism financing laws 382 times. Meanwhile, Crown Perth allegedly crossed them 165 times.
Each breach of the law could cost Crown between $18 million and $22.2 million.
Thus, the fines could theoretically cost the company billions of dollars. Though, it's worth noting that AUSTRAC will likely consider Crown's ability to pay before deciding on an amount.
This is likely no surprise to keen-eyed market watchers. The casino operator's half-year earnings report stated AUSTRAC's investigation was likely to result in civil penalty proceedings.
It also said it's "likely that Crown Melbourne and Crown Perth will be required to pay significant civil penalties" on the back of the proceedings.
However, the company hasn't put aside any provisions to pay the fines, stating it's impossible to estimate the potential cost.
Crown share price snapshot
The Crown share price has been cruising through 2022 so far.
It has gained 3% since the year began. It's also currently 24% higher than it was this time last year.
Crown's current share price is 5% lower than Blackstone's bid at $13.10 per share.
