Oaktree Captial Offers Packer an Exit Route

Oaktree Capital offers to buy James Packer's Crown Resorts shares

American asset management firm Oaktree Capital Management has offered James Packer a way out of Crown Resorts. Oaktree Capital has offered to purchase some or all of Packer’s 37% stake in Crown. Packer is considering the $3 billion offer.

The Oaktree Capital offer comes a month after Blackstone Group bid $8 billion for a total takeover. It arrives less than a week after Packer struck a deal with the New South Wales regulator that sees him relinquish much of his immense voting power.

Packer’s deal with the NSW Independent Liquor and Gaming Authority is ground-breaking. The regulator allowed Packer to keep his 37% stake in Crown Resorts if he abides by some strict guidelines.

The 53-year-old is not allowed a member of his Consolidated Press Holdings on the Crown board until October 2024. Furthermore, Packer relinquished his voting rights on all matters affecting management or business operations.

Oaktree Capital Puts “Structured Instrument” on the Table

Crown Resorts has two offers to consider. The $8 billion complete takeover from Blackstone is the preferred option because it gives the company a fresh start. It wipes the slate clean and allows Crown to rebuild its severely damaged reputation.

However, the offer from Oaktree Capital is appealing, and Crown will take plenty of time before deciding which offer to choose.

Oaktree Capital’s offer has many positives. Removing Packer from Crown resolves regulator concerns is a significant plus point. The Oaktree deal allows Crown to move on without selling the entire company at a price below pre-COVID-19 levels.

Many Crown shareholder declined Blackstone’s offer because it undervalues the company. Blackstone offered $11.85 per share, valuing Crown at approximately $8 billion. Wynn Resorts offered $14.75 per share in April 2019

, a massive 21.8% difference.

Accepting the Oaktree Capital deal gives Packer an exit strategy and keeps the door open for future takeover deals.

Managing Director of White Funds Management, Angus Gluskie, questions why Oaktree does not want a complete takeover.

“There is obviously a reason Oaktree doesn’t want some element of the business or wants to receive some uplift in the return that accrues to them, above and beyond the return of a normal shareholder.”

Crown shareholders reacted positively. Its shares are trading at $12.04. It was not the same story for Oaktree Capital. Its shares fell from US$26.97 to US$26.00.

Official Response to Latest Development

Crown Resorts issued a statement to the Australian Securities Exchange regarding the new offer.

“Crown announced that it has received an unsolicited, preliminary, non-binding and indicative proposal from a company on behalf of funds managed and advised by Oaktree Capital Management to provide a funding commitment of up to $3 billion to Crown via a structured instrument with the proceeds to be used by Crown to buy-back some or all of the Crown shares which are held by Consolidated Press Holdings Pty Limited on a selective basis.”

The statement shows Crown has not yet assessed the offer. It also reveals Consolidated Press Holdings cannot and will not vote if and when the time comes.

The Company Behind This Latest Bid

Oaktree Capital Management is an American global asset management company. The company is not as substantial as Blackstone Group, but it is still huge. The company manages almost US$150 billion worth of assets for its client, which includes 73 of the 100 largest US pension plans.

It is a cash-rich company with more than US$1.20 billion cash in hand thanks, in part, to US$166.02 million of net revenue in 2020. The company has a market capitalisation of US$8.22 billion ($10.63 billion) which means the Packer offer is a significant investment.