Oaktree Revises Offer For James Packer’s Crown Shares

Oaktree revosed its offer for James Packer's Crown Resorts shares

Oaktree Capital Group has revised its proposal to purchase James Packer’s Crown Resorts shares. The American global asset management company is prepared to pay $3.1 billion.

Packer’s Consolidated Press Holdings owns 37 per cent of Crown Resorts’ stock. The 53-year-old recently struck an unprecedented deal with the NSW Independent Liquor and Gaming Authority, relinquishing most of his voting power.

The regulator allowed Packer to keep his 37 per cent stake, despite rumours they would force a sale. However, Consolidated Press Holdings is not allowed anyone on the Crown board until October 2024. Furthermore, Packer waves his voting rights on matters affecting management or business operations.

Oaktree’s latest offer is a slight increase on the $3 billion offered initially in April. $2 billion comes from a private term loan, with an additional $1.1 billion load funding the rest. The $1.1 billion loan is convertible into Crown shares at a strike price of $13 each.

There are particular circumstances for the $1.1 billion loan converting into Crown shares.

“The Convertible Component of the facility would give Oaktree the ability to convert the $1.1 billion tranch into new shares in Crown at a strike price of $13.00 in specified circumstances, including a time after the first anniversary of the facility provided that the Crown share price is about $13.00 (based on a 30-day VWAP).

Those shares closed at $12.20 per share on June 15.

Oaktree Is Not The Only Party Interested in Crown

Crown is yet to form a view on the merits of the revised Oaktree proposal. However, experts are of the opinion the Crown board prefers this option over the others on the table.

Regulators are not happy with Packer’s influence over Crown’s operations. He enjoys immense voting power despite stepping down from the board in 2018. The Bergin Inquiry, in particular, had nothing positive to say about Packer’s involvement with the underfire casino giant.

Crown rejected an all-cash offer of $8.4 billion from Blackstone Group, which want complete control over the company. The proposal, although huge, seriously undervalued the company, according to Crown. Blackstone is yet to come back with an increased offer.

The Crown board is currently considering an all-stock buyout from Star Entertainment worth $9.5 billion. Any combined group will create a $12 billion casino giant.

Revised Offer Comes On The Bad Of Negativity

The revised Oaktree offer comes after damaging revelations about how Crown operates. The Royal Commission is tearing Crown’s operations to pieces, leaving no stone unturned, and asking difficult questions.

Commissioner Ray Finkelstein QC slammed Crown for its lack of responsible gambling procedures. Finkelstein heard Crown employs a mere 12 advisors who supervise over up to 64,000 daily visitors.

Equally as worrying is the fact Crown knowingly underpaid pokies tax to the tune of $167 million. Crown illegally added extra costs to its pokies, including loyalty programme payments, to pay less tax to the government. Adding tax avoidance to the long list of charges against the stricken company is not what the board needs.

The Royal Commission continues to turn up new negatives on a seemingly daily basis. It is, therefore, not surprising the Victorian government gave the commission an extension. The inquiry was due to publish its final report on August 1. Victoria’s local government granted an extension until October 15. It also increased the commission’s budget from $10 million to $19.75 million.

Crown, in our opinion, should look to accept one of the deals that are on the table and do so soon. Everything points towards Crown remaining unable to open its Barangaroo casino for the foreseeable future. Furthermore, its licences for Melbourne and Sydney are under serious threat. What good is a casino without permission to operate? The current offers are likely as good as they will get.