Crown Resorts faces growing calls from shareholders to start a formal sale process for the wounded casino giant after becoming the subject of a bidding war.
The James Packer-backed casino group received a $12 billion merger proposal from its Sydney rival The Star on Sunday, while US private equity group Blackstone also upped its takeover bid to around $8.3 billion.
Crown’s Helen Coonan-led board has so far played a straight bat to the approaches, frustrating shareholders who are eager to see a deal happen.
That includes Crown’s third largest shareholder Perpetual – owner of around 8 per cent of Crown’s share, just behind suitor Blackstone (10 per cent) and major shareholder James Packer (37 per cent) – which has called that company to immediately start a fast-tracked sale process.
Wilson Asset Management portfolio manager John Ayoub agreed that Crown should open a data room and invite bidders to inspect its books now to get the best deal for shareholders.
“You’ve got multiple parties coming to the table – we would like to see them canvassing as many opinions as they can,” said Mr Ayoub, whose fund owns shares in both Crown and The Star.
“Silence has been their tactic to date and it’s smoked out two or three potential bidders. But going forward I think providing a data room and a transparent and open process is going to be the most beneficial thing for shareholders to see where value can be realised.”
US buyout fund Oaktree has also offered Crown $3 billion in funding to selectively buy back some or all of James Packer’s shares.
Sydney fund manager VGI Partners, which owns around $40 million of Crown shares and a smaller amount of The Star, said it saw the merger as “fair and reasonable and hope that the Crown board will engage with Star”.
“While we think the Blackstone and Oaktree bids materially undervalue Crown, the merger proposal from Star is … a lot more interesting and appealing to us,” said VGI executive chairman Rob Luciano.
“As long-term investors, we’d prefer to keep our capital invested in a great asset that can continue to compound over time and create meaningful shareholder value rather than sell for a quick profit.”
It is increasingly common in the casino and hotel industry to split up the ownership and operation of properties.
Mr Luciano said that Crown and Star had both recently completed a period of significant capital investment, setting up a merged entity to be highly cashflow generative that could de-leverage quickly and then start delivering material shareholder returns.
Blackstone is offering more up-front cash for Crown shareholders in its takeover bid ($12.35) but most market analysts say that The Star’s nil-premium cash-and-scrip merger will deliver more value through the COVID-19 recovery, if it delivers on promised cost savings.
The Star’s proposal is to buy back up to a quarter of Crown’s share at $12.50. Shareholders in both companies would be issued stock in the new company as a swap rate of 2.68 Star shares for each Crown share. The Star says that it could find $150 million to $200 million worth of annual savings by merging with Crown, worth around $2 billion in equity value, which makes its offer worth $14 a share.
The Star’s CEO Matt Bekier also flagged this week he would look for a further windfall by selling and leasing back the merged group’s property portfolio, which would span two casinos in Melbourne, two in Sydney, Brisbane, the Gold Coast and Perth.
It is increasingly common in the casino and hotel industry to split up the ownership and operation of properties, with Blackstone involved in such a deal in with MGM in Las Vegas, and is considered by analysts and investors as a possible property partner with The Star if the merger goes ahead.
Crown shares closed at $13.04 on Friday, up 2.3 per cent for the day and up 7.6 per cent since The Star’s proposal was revealed by this masthead on Monday morning. The Star’s shares closed 2.8 per cent higher Friday, and up 1 per cent for the week, at $4.06.
Source: Thanks smh.com