An American private equity firm, Blackstone Group Inc. (Blackstone) has bought the share owned by Macau’s Melco Resorts & Entertainment Ltd. (Melco) in one of Australia’s largest gaming and entertainment groups, Crown Resorts Ltd. (Crown).
On Wednesday, April 29, 2020, Australian casino operator Crown disclosed the deal in a market filing and with this deal, Melco exited from its shareholdings from Crown, and Blackstone became the second-largest stakeholder of the Australian casino company.
Blackstone’s Shares in Crown
Under the deal, the American investment firm Blackstone would own a 9.99% share of Crown, which makes the private equity investor the second-largest holder in the casino company after the company’s billionaire founder, James Packer. With the accomplishment of the deal, it was speculated that the equity firm would now aim to buyout the casino company, which was struggling to cope with shutdown to slow the spread of the coronavirus.
Even before the virus pandemic forced to close the business operations, Packer had a plan to sell off his share around 37% stake in Crown to Melco; however, the deal was declined due to regulatory hurdles amid the economic crisis prompted by the virus.
While Blackstone declined to comment on the deal, Crown said a short statement confirming the deal that Melco made a sale of 67.7 million shares to the private equity firm for A$8.15 each, putting the transaction value at A$551.6 million ($359.04 million). Following the news, shares of Crown jumped as much as 12.3% to their highest since March 6 and were up 10% against a 1% gain on the benchmark ASX200 index on early Wednesday.
Blackstone’s Buyout Plan for Crown
Crown, which was reported to have a market capitalization of more than A$8.7 billion in April 2018, had been struggling since the eruption of the virus pandemic had forced to close its operations across Australia. Analysts speculated that, after the completion of the deal, Blackstone, with $570 billion assets under management, may target a bid for acquiring more or all of the Australian company.
Similarly, James McGlew, executive director of corporate stockbroking at Argonaut, explained, “The sale has certainly stoked the fire of perceived corporate activity in Crown.” McGlew added, “Hard to say if (a takeover) is imminent but as with big game hunting, it’s easier to track prey when it is weakened. COVID-19 has certainly done this to the casino and resort sector.”
Crown shares were trading at A$9.45 by early afternoon and have declined 21% since February 20 when restrictions on movement, including border closures, were imposed by the government that shattered the businesses on public entertainment and tourism.
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