In a turn of events, Crown Resorts, an Australian casino operator, gave a statement to the Australian Stock Exchange stating that the latest bid from the private equity giant in the U.S., Blackstone, has been rejected. The casino operator cited that the bid from Blackstone was too low to consider. A decision, according to the statement, that all Crown Resorts’ board members agree on unanimously. Blackstone offered to acquire the casino operator for a total of AU$8.4 billion. According to reports, Crown Resorts may be considering an offer from a different entity. Additionally, a regulatory investigation has also started looking into Crown Resorts’ questionable VIP business practices.
The rejection of the Blackstone offer immediately shifts the attention to a separate offer from an Australian company. The Star Entertainment Group, Crown Resorts’ most notable competitor, proposed a merger that would involve the amalgamation of the two companies along with all of Crown Resorts’ stock. The offer from its competitor also comes with a more attractive price tag. The offer from Blackstone put the per-share cost at AU$12.35 while Star Entertainment is willing to pay AU$14.00 per share. Overall, an offer that could mean instant value as well as a partnership that furthers the progress of the company.
If a merger between the two Australian gaming giants were to occur then the larger entity would create cost savings that Crown Resorts and the company’s shareholders would be interested in. Even though the two companies would benefit greatly from the merger, antitrust issues may arise if the offer is accepted. In another statement made to the Australian Stock Exchange, Crown Resorts said that the offer from Star Entertainment Group is still under consideration and at this time more information has been requested to make an informed decision for the way forward.
Following 2020, a year that caused many financial difficulties for Crown Resorts along with turbulence related to industry regulations. The regulatory issues include an investigation into whether the operator meets the standards for licensing suitability. As the investigation progressed in New South Wales, the company was stripped of the license it held in Sydney. Regulators discovered that Crown Resorts’ VIP gaming division had conducted business with entities linked to organized crime and also assisted and facilitated the practice of money laundering.
Subsequently, the company was told that improvements need to be made regarding its corporate culture and governance if the company ever wants to be considered for the relicensing process in New South Wales. A consideration that Crown Resorts would want to be given, seeing that the company recently finalized construction of a high-end hotel-casino located on the Sydney waterfront. However, the consensus among industry stakeholders and analysts suggest that the company can find its way out of its current predicament and emerge victoriously. It could also once again be in a position of strength as a leading player in the Australian gaming industry. That is one of the main reasons why Blackstone is interested in acquiring the company and its assets.
Before Crown Resorts re-establishes itself in the market, there are still many issues that need to be resolved. Such as a new inquiry in Victoria, the Australian region where Crown Resorts has its flagship property, Crown Melbourne. The proceedings of the inquiry did not start positively. A representative from the Victoria Gaming Regulator stated that he has been lied to on several occasions by Crown Resorts representatives and the testimony was given at the hearing which was chaired by the former judge Ray Finkelstein.
Furthermore, Timothy Bryant, a compliance officer for the Victoria Gaming Regulator gave testimony against Crown Resorts. He said that the company persistently conveyed an attitude of belligerence, especially during a 2016 investigation that was focused on the arrest of 18 of the company’s employees by Chinese authorities. The employees were arrested for promoting gambling in China, illegally. Bryant added that the inquiry is far from over as he is still considering if the issue and Crown Resorts should be referred to the Supreme Court as it showed no willingness to cooperate during the investigation.