Blackstone’s takeover bid of Crown Resorts Casino
Australian gambling regulators have approved Blackstone’s takeover bid of $6.3 billion for Crown Resorts Ltd. Crown Resorts has been subject to a great deal of scandal recently and with experienced private equity firm Blackstone at the helm investors will likely be feeling some relief.
The Australian gambling company, Crown Resorts Ltd. has been hit by a series of blows recently. On May 22nd the company’s chief executive, Rowen Craigie, and its general counsel, Thomas Davis, were arrested in China and detained on allegations of bringing in more than 100 million U.S dollars worth of gambling chips into the country. Two days later, the Chinese government announced it was banning all casinos from offering “foreign junkets”, or VIP trips to gambling in Macau’s casinos. In addition, Hong Kong’s Narcotics Bureau raided Crown’s headquarters. They found that the casino offered monetary advantages to customers such as betting rebates.
The company itself has also come under fire for its attempts to engage in money laundering. As a result of Crown Resorts’ actions from 2010 to 2012, the Australian Federal Police (AFP) conducted an investigation into foreign bribery which resulted in charges being brought against Crown Resorts Ltd. This case is still being heard.
Gambling addiction is also a major concern to the company and its shareholders. The company has now announced that it will be implementing an alert system for its customers to be able to call for help if they have gambling problems or may become addicted to gambling.
Blackstone’s takeover strategy of success
Blackstone Group LP was established in 1985, and what started as a $400 million fund 20 years ago is now worth $435 billion. The foundation of Blackstone has been the purchase of businesses and the subsequent expansion. Blackstone takes over businesses, crafts a strategy to increase profits, and then sells the business, resulting in an even greater profit for shareholders.
The takeover bid by Blackstone Group LP had been ongoing since April 2015, but they are now making it official with a formal offer to purchase Crown Resorts from a private equity firm called Apax Partners. The bid is valued at AU $1.8 billion and Blackstone will also be buying Crown’s debt of approximately $2.7 billion. The offer is being made to all shareholders, including suppliers and customers.
Expansion into Australia and China
One of the significant factors in this deal is that it will allow Blackstone to increase its presence in Australia. Blackstone has continued to purchase businesses in Australia despite its expansion into China, India, and Europe. Blackstone will be taking over Crown Resorts in a joint venture between Crown and another party. However, in effect, Blackstone will be able to operate the resorts as it pleases. Blackstone recently announced that it would be making its first foray into the Chinese market. The plan was to break open the market with a $4 billion purchase of Sun International Gaming Ltd. Crown has been in Australia for 25 years and is much more visible here than in China (mainly due to their successful VIP gaming program).
Blackstone Group LP offered to buy 12 casinos in Las Vegas from billionaire Steve Wynn for $2.4 billion in 2013. Wynn was due to receive a significant sum after he sold off the properties. In the end Blackstone backed out of the deal, resulting in a dispute between the two parties.
Blackstone’s takeover of Crown Resorts will result in the company having 13 casinos in Australia, including exclusive villas on the Gold Coast and Heron Island. It will also add two casinos in New South Wales (Perth and Grafton) and one in Victoria (CBD). Blackstone hopes to complete all the transactions by November.
Due to the high debt load that Crown Resorts has incurred, it is unlikely that any of the properties will be sold separately. In addition, Blackstone’s purchase of Crown Resorts means that it is highly unlikely that the New South Wales government will be able to buy back any of the casinos in Sydney. The high cost could prevent Crown from purchasing the casino at Barangaroo, which was previously sold by James Packer but put on hold due to a conflict with NSW.
Blackstone’s takeover impact on Crown Resorts shareholders
Blackstone’s takeover bid is good news for shareholders and suppliers who will be paid out and privy to the change in management. Blackstone has a history of increasing the profits of businesses that it takes over and Crown Resorts should benefit from this too. They will also likely increase the level of new reservations and further develop Crown’s VIP gambling program. Blackstone’s aim for Crown Resorts is for it to become the most respected gaming company in Australia as well as a global leader, so watch this space.
The takeover of Crown Resorts by Blackstone is good news for shareholders, suppliers, and customers alike. Blackstone has a history of increasing the profits of businesses that it takes over and Crown Resorts should benefit from this too. Blackstone will probably have a chance to increase the level of new reservations and further develop Crown’s VIP gambling program. This expansion for Crown Resorts is also very important due to its current position. The company is Australia’s largest casino operator and one with a reputation for high standards in service. Crown Resorts’ share price has fallen over the past few months due to this concern and need to raise more capital. The share price is currently AU $0.46 and Blackstone’s bid is a sound financial decision for shareholders; they will be paid out with no trouble at all.
Call for changes to gambling laws in Australia
Australian lawmakers have been pressing for the country’s gambling laws to be made more stringent. One of the proposed changes would make Crown Resorts liable to licensing requirements similar to those imposed on other casino companies – including thorough background checks on owners and directors, and more stringent measures for keeping money offshore. This is a key point for Crown Resorts, as it currently has some $3 billion in revenue that could go offshore if the new laws were introduced.
Crown has been in legal disputes over whether it should be subject to gambling regulations like other casinos. This could result in further losses for shareholders if it loses the case. Blackstone will not have to worry about any of this. It has already acquired the licenses that Crown is currently avoiding.