Crown Resorts (ASX:CWN) - Founder, James Packer
Founder, James Packer
Source: Tim Wimborne/Reuters
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  • Crown Resorts (CWN) has received a $3 billion offer from Oaktree Capital to acquire James Packer’s interest in the embattled casino giant
  • Crown said it would consider using the offer as a “structured investment”, under which the proceeds would be used to buy back shares owned by Packer
  • The Oaktree offer complicates a separate proposal from Blackstone, under which it would acquire all of Crown’s share for roughly $8 billion
  • Nevertheless, it offers an alternative that would allow Crown to remove Packer without accepting a takeover deal below investor expectations
  • Crown Resorts is up 0.38 per cent to $11.96 per share

Crown Resorts (CWN) has received a $3 billion offer from Oaktree Capital to acquire James Packer’s interest in the embattled casino giant.

In a statement released on Monday, Crown said it would consider using the offer as a “structured investment,” under which the proceeds would be used to buy back some or all of the shares owned by Consolidated Press Holdings — the holding company through which Packer owns a 37 per cent stake.

The proposal complicates a separate offer from Blackstone Group worth around $8 billion, whereby the U.S. private equity firm — which already owns a 9.99 per cent stake in Crown — would buy all the remaining shares at $11.85 each.

Under the Blackstone deal, Packer would also pocket roughly $3 billion.

Packer has been a central figure in the recent criticism of Crown’s operations, which ultimately led to regulators finding the company unfit to hold a gambling licence for its new Sydney casino.

With regulators citing Packer’s influence as at least partly responsible for alleged activities such as money laundering, he previously indicated that he would be willing to divest his holding.

Among a host of recommendations, a report published earlier this year suggested making anyone with a stake in Crown totalling more than 10 per cent subject to the same high standards of character and propriety as the licensee itself.

Meeting those standards could be difficult for Packer after he made what the report called a “disgraceful and shameful threat” to a businessman advising on a potential privatisation of Crown Resorts.

Many investors have declined to endorse the Blackstone proposal, which came through on March 22, arguing that the company had a much higher market capitalisation prior to the rise of COVID-19, which hammered its operations and led to a $121 million half-year loss.

“Blackstone couldn’t get away with a price like this if the casinos weren’t being affected by COVID and the management issues at the same time,” said Nathan Bell, portfolio manager at Intelligent Investor, which owns a package of Crown shares.

“It’s only an opening bid. It’s a messy situation and offering to acquire a casino is a complex affair at the best of times due to all the regulation.”

In contrast to the Blackstone deal, the proposal from Oaktree would allow Crown to remove Packer without agreeing to a takeover price below investor expectations.

“Oaktree might be positioning itself to do something creative with Crown,” Bell added.

Blackstone has a history of buying similar companies and spinning off their property assets, and there is “no reason Crown couldn’t copy the strategy and do it themselves” with Oaktree’s help, Bell continued.

Crown said its board “has not yet formed a view on the merits of the Oaktree proposal” and will begin a process to evaluate the offer.

Crown Resorts is up 0.38 per cent to $11.96 per share at 2:57 pm AEST.

CWN by the numbers
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