Global investment firm Oaktree Capital Management has offered Crown Resorts as much as A$3 billion (approx. $2.3 billion) in financing to help the Australian casino operator buy some or all of James Packer’s 37% stake in the embattled company.
Mr. Packer is the largest shareholder in the gaming and hospitality giant. His shares in Crown are held via his private investment vehicle Consolidated Press Holdings. CPH’s shareholding is estimated to be worth around A$2.98 billion based on Crown’s Friday share price of A$11.92.
Crown said Monday morning that Oaktree, which specializes in alternative investment management and focuses on credit strategies, has offered the funds for a possible deal through a “structured investment.” According to the terms of the proposal, the casino operator will be able to use the money to purchase a portion of or the entire stake owned by Mr. Packer.
Oaktree’s offer is unsolicited, preliminary, and non-binding. Any buyback of Crown shares from CPH would be subject to approval from company shareholders. The Crown board said Monday that it “has not yet formed a view on the merits of the Oaktree Proposal” and that it would now “commence a process to assess” the offer.
News about Oaktree’s proposal emerged just as the casino operator’s board is considering an earlier A$11.85 per share conditional offer from US private equity giant Blackstone Group.
Packer and NSW Regulators Strike Deal
Mr. Packer’s potential exit from Crown could assist the company in its ongoing rehabilitation effort after New South Wales regulators rendered it unfit to operate a casino at its luxury resort in Sydney.
An 18-month probe lead by former NSW Supreme Court Judge Patricia Bergin found that the casino operator had facilitated money laundering at its casinos in Perth and Melbourne, collaborated with members of Asian organized crime, and failed to protect 19 China-based staff members from being arrested in the fall of 2016 for illegally promoting gambling in the mainland.
The inquiry also noted that Mr. Packer had “deleterious” influence on the company. Late last week, NSW regulators struck a deal with the billionaire businessman, under which he was allowed to keep his stake in Crown and use it to accept or reject takeover proposals. However, the agreement limited Mr. Packer’s majority shareholder power on all other major issues.
Crown is currently also facing royal commissions in Western Australia and Victoria and a money laundering investigation by Australia’s financial crime watchdog, AUSTRAC. All these could result in the company being slapped with millions of dollars in fines. It could also lose its licenses to run its Perth and Melbourne casinos.
It was last week again when Blackstone, which owns a 10% stake in Crown, tabled a revised offer for the entire company. Under the modified proposal, the casino operator must not lose more licenses from state gambling regulators before the transaction is given the green light.
Crown has been mum on the revised offer, which may suggest that the company is not in a rush to seal the deal. According to Australian news outlets, the price offered by Blackstone remains a point of contention as some of the company’s investors feel it undervalues it and the casino operator is worth up to A$16 a share.
Source: Oaktree lobs $3b bid for Packer’s Crown stake, taking on Blackstone, Australian Financial Review, April 19, 2021