An AU$8 billion non-binding takeover offer from US private equity giant The Blackstone Group could help Crown Resorts meet regulatory requirements for its Australian casino operations, according to Fitch Ratings.
In a Wednesday note, Fitch said the acquisition of all outstanding Crown shares by Blackstone – which currently holds a 9.99% interest – or any other group would aid Crown’s remediation efforts as it would permanently end the relationship with Crown’s largest shareholder, James Packer’s Consolidated Press Holdings (CPH).
The NSW Independent Liquor and Gaming Authority deemed Crown unsuitable in February on the back of the Bergin inquiry, whose findings included identifying CPH as the source of significant corporate governance lapses. In particular the inquiry revealed undue influence by CPH and Packer over the Crown Resorts board.
While Crown has remained non-committal in regards to The Blackstone Group’s offer, Fitch said it “could help the Australian gaming operator meet the requirements set by regulators to proceed with its Sydney casino.”
However, “it remains crucial that the company continues its remediation process to address all the regulators’ concerns, particularly amid Royal Commissions in its two main operating jurisdictions.”
While local media outlets have suggested Crown is unlikely to accept such a deal at the current offer price, analysts have theorized that The Blackstone Group could be pre-empting a partnership with Crown’s local rival Star Entertainment Group. Under such a scenario, Blackstone may acquire the assets and Star manage the casino at Crown Sydney with JP Morgan’s Don Carducci and Abhinay Jeggannagari predicting Star could earn up to AU$110.5 million per annum on an EBITDA percentage basis to do so.
Despite the offer, Fitch said it is keeping Crown on Rating Watch Negative given that Blackstone would need to pass lengthy probity checks before any such deal could proceed.
“Fitch placed all ratings on Crown on Rating Watch Negative (RWN) in November 2020 to reflect the various regulatory risks facing the company,” it said.
“The Blackstone offer is subject to a number of conditions and subject to acceptance by Crown’s board, and hence does not alter the risks to the rating that is captured by the current RWN.”
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