BGH Capital Lining Up Crown Resorts Bid
It looks ever more likely Crown Resorts will have new owners sooner rather than later. BGH Capital is the latest cash-rich company declaring its interest in acquiring Australia’s biggest casino operator.
BGH Capital is yet to throw its hat into the ring officially, but sources suggest a bid is forthcoming. The Australian private equity company launched in 2017 with Robin Bishop, Ben Gray, and Simon Harle founding it.
2020 was the busiest year yet for BGH Capital. It made significant investments in Healius Primary Care and spent $758 million on Australia’s largest theme park and cinema operator, Village Roadshow.
Ironically, BGH Capital played a significant role in Blackstone Group’s purchase of 9.99% of Crown Stock. Blackstone Group tabled an $8.02 billion bid for all Crown shares earlier this month.
The company focuses on the Australian and New Zealand markets but spends sums in the hundreds of millions. Acquiring Crown Resorts will not come cheap; BGH Capital needs to break the bank to secure a deal.
BGH Capital Faces Competition From Blackstone and Oaktree
Any potential BGH Capital bid is a long way off, but they need to act fast. This is because two major investments firms have lodged bids already.
Blackstone Group was the first company to make a concrete offer for the under-fire Crown Resorts. The American giant bought 9.99% of Crown’s stock from Melco resorts for $552 million. It wants the other 90.01% and offered $11.85 cash per share for it, valuing Crown at $8.02 billion.
Blackstone’s offer represented a 19% premium on Crown’s share price, but those shares trade at $12.22 today.
JP Morgan analysts think Crown will reject this big because it undervalues the company.
“Based on where Crown (and Star Entertainment Group) were trading before COVID-19 (and with the upside potential of Barangaroo), our initial view is $11.85 per share would be insufficient for approval from shareholders and the board.”
Crown has not officially rejected or accepted the offer; it keeps its cards close to its chest.
Oaktree Capital Management is another giant company in the running for Crown. It intends to purchase some or all of James Packer’s 37% stake. A price in the region of $3 billion is on the table.
The Oaktree offer, if accepted, goes some way to appease regulators who lamented Packer’s influence over Crown. Getting Packer out of the picture benefits Crown in the short and long term.
Packer struck a deal with the NSW Independent Liqor and Gaming Authority, which prevents him from exercising voting power on decisions that affect Crown. He is, however, allowed to discuss the sale of his holding.
What Is Likely To Happen?
Crown needs to decide what course it wants to move down to progress any deal. BGH Capital is the least likely of the trio to come away as the new Crown owners, in our opinion. The company does not have the financial clout to compete with the two other interested parties.
Its biggest deal is way less than $1 billion. Buying only Packer’s shares comes with a $3 billion price tag. It is difficult to see any offer that BGH Capital can afford that will be appealing to Crown.
Oaktree’s offer is strange. It can afford to buy all the Crown stock but does not want to. The current Crown board will favour this offer because it rids the company of the bad apple, Packer, while potentially keeping them all in jobs.
Blackstone is the one to watch, however. These Americans do not know what it is like to lose; they always get what they want. Crown will reject its initial offer but expect Blackstone to come back with a bigger, better bid. This deal favours shareholders more than the influential board, but the second offer has to be quite a lot more than the current share price of $12.22.
