Crown Rejects Blackstone Bid But Hands Over Information

Crown Resorts rejects the latest Blackstone bid for 100 percent of its stock, stating the offer undervalues the board's valuation.

Crown Resorts officially rejected the latest Blackstone bid for 100% of Crown shares. The Blackstone bid valued Crown stock at $12.50 per share, a figure the Crown board deems too low. Crown’s board is adamant the company is worth more than the $8.5 billion the Blackstone bid valued the casino giant at.

“The Crown Board has carefully considered the proposal, including obtaining advice from Crown’s financial and legal advisers. Crown has discussed the proposal with Blackstone and its advisers and has also considered feedback from shareholders and regulators.”

“The Crown Board is of the view that the proposal does not represent compelling value for Crown shareholders. However, the Crown board has offered Blackstone the opportunity to access non-public information to allow Blackstone to undertake initial due diligence on a non-exclusive basis so that it can formulate a revised proposal that adequately reflects the value of Crown.”

“The provision of such information is conditional on Crown and Blackstone entering into an appropriate confidentiality agreement.”

Is Another Blackstone Bid Incoming?

The top and bottom of that statement are Crown rejecting the latest Blackstone bid. Industry experts predicted this was the most likely course of action because Crown’s board believes it is a better place now the Royal Commission into its Melbourne property is done and dusted.

However, the fact Crown is sharing confidential information with Blackstone speaks volumes. Crown’s board obviously wants a sale, otherwise, why hand over insider information.

Another Blackstone bid looks likely. The American investment group made it clear it wants a foothold in Australia, with Crown its prime target. Blackstone already owns 9.99% of Crown stock. It purchased this holding from Melco Resorts’ Lawrence Ho, who bought the stock from James Packer. The Packer to Ho sale triggered the long and arduous royal commission.

The latest offer represented a 26.5% premium on Crown’s share price when Blackstone lodged its bid. However, Crown’s shareholders reacted positively, which sent the share price soaring to $11.55. Shares are changing hands at $11.26 today.

You get the feeling Crown’s board wants a Blackstone bid closer to the company’s all-time high. People paid $16.17 per Crown on February 1, 2014, almost eight years ago. However, that was before wrongdoings dragged Crown’s previously good name through the mud.

Why Does Blackstone Want Crown Resorts?

Blackstone is in the business of making money, something it does very well. The company’s net income for the 2020 financial year tipped the scales at US$2.26 billion ($3.22 billion).

Crown usually makes a lot of money. Any successful casino essentially has a licence to print money. Indeed, 2020-21 was a rough year for casinos in Australia and further afield because of COVID-19 related closures. Still, Crown “only” lost $261 million despite a 31.3% fall in revenue.

Crown announced it cost $120.6 million to the enforced closures. Furthermore, it spent $54.6 million on the pre-opening of Crown Sydney and the making right of the casino tax underpayment.

Prior to the unprecedented 2021 year, Crown showed itself to be a profitable business. It made $79.5 million last year, $402 million profit in 2019, and $558.9 million in 2018. It does not take a genius to work out Crown’s profit levels will repay Blackstone’s investment in a decade.

When Will Blackstone Lodge Another Bid?

Another Blackstone bid is on the cards, although the Americans are keeping their cards close to their chest. Blackstone has not made any announcement, nor indicated another bid is incoming. However, the fact it really wants Crown and is now looking over confidential papers suggests it is a matter of when not if a new bid comes in.

It is surprising that no other entity has come in for Crown with a concrete offer. Rumours were rife when Crown’s share price hung around the $8.50-$9.00 mark, but nothing materialised. It is likely Crown’s board values the company too high, which puts off potential suitors.