Crown Melbourne Royal Commission Presents Suitability Report

The royal commission into Crown Melbourne submits its suitability report

The royal commission into Crown Resorts’ Melbourne casino has submitted its suitability report to the Victorian government. Investors in the Australian gambling giant will learn the company’s fate by November 1, 2021.

A similar inquiry in New South Wales determined Crown was unsuitable to run a casino. Crown Sydney’s $1.6 billion development in Barangaroo has no casino as a result. Instead, Crown Sydney is a high-end resort hotel and residential complex.

Former federal judge Ray Finkelstein headed the royal commission into Crown Melbourne. He delivered his final verdict into the suitability of Crown to run a casino in Victoria on October 15. The government is keeping the report private until it decides on the required actions.

Melissa Horne, the Minister for Consumer Affairs, Gaming and Liquor Regulations, thanked Finkelstein and his team for their work.

“An incredible amount of work has gone into the Royal Commission into the Casino Operator Licence and we thank Raymond Finkelstein for his report. We’ll consider the findings and recommendations from the Royal Commission in detail and take whatever action is necessary to strengthen casino oversight in Victoria and ensure this never happens again.”

Those last five words do not bode well for Crown. They suggest any action taken will be severe.

Suitability Report Likely To Deem Crown Unfit For a Casino Licence

Everything points towards the report finding Crown unfit to hold a Victorian casino licence. Finkelstein, known for not pulling any punches, was repeatedly critical of Crown.

“Wherever I look, I see not just bad conduct, but illegal conduct, improper conduct, unacceptable conduct, and it permeates the who organisation.”

Adrian Finanzio is another member of the counsel who compiled the report.

“Crown Melbourne is not presently suitable to hold a casino license,” Finanzio said as the royal commission submitted its suitability report.

John Ayoub is a portfolio manager for Wilson Asset Management, who is a Crown Resorts investor. Ayoub believes the suitability report will deem Crown unfit for a license.

“The expectation is that they will be deemed unfit. The unknown is: what does that mean? There is a balance between jobs and tax revenues that the casinos do generate. Tourism is going to be a big way we can get ourselves out of the state debt holes. It’s critical infrastructure.”

What Are The Possible Outcomes?

The Victorian government has the power to cancel Crown’s casino license. Doing so would leave Crown unable to operate its Melbourne casino. Such a move would be disastrous for Crown because Melbourne is responsible for $0.65 of every $1 in Crown’s revenue.

Allowing Crown to work with the Victorian government is one available option. This was unlikely at best a few months ago, but several prominent Crown board members fell on their swords and resigned from their roles. The fact most of Crown’s senior management team are gone could help Crown’s cause.

However, the charges levied against Crown are severe. They ignored blatant money laundering and continued using junkets despite obvious links to organised crime. Furthermore, Crown essentially cooked the books to pay less tax to the Victorian government. The suitability report contains mentions of all those things.

Forcing Crown to sell its assets is another possible route. This is the most complicated and would likely see Crown launch legal action. Forcing Crown to sell would not be easy either. Most potential suitors are no longer waiting to swoop in.

Blackstone Group was prepared to purchase all Crown stock for $6.5 billion but Crown’s board rejected the offer. Blackstone did not return with a more substantial offer.

Oaktree Capital was interested in acquiring James Packer’s 37% stake in Crown, but Oaktree rescinded that offer in August without any explanation.

Lastly, Crown’s rivals, Star Entertainment, expressed an interest in a merger. However, Star faces its own regulatory problems and would not pass a suitability test presently.