Billionaire James Packer suddenly has a whole new set of possibilities to consider following a bid for his beleaguered Crown Resorts by the biggest private equity firm in the world, Blackstone.
Blackstone’s cash bid comes in at $11.85 a share and values the company at $8 billion. This has been widely regarded as an opportunistic move as it trades on the achievable value assuming Crown is broken up.
Blackstone’s potential plan to split and auction off Crown’s assets, which include its casinos in Melbourne, Sydney and Perth, exposes that beyond the $5 billion value that the hotel and resort assets represent, the operation’s gaming licences also represent significant value. A casino’s gaming licences and property assets are traditionally linked but selling them separately is permitted.
Crown’s balance sheet values the licences at $1 billion, however, this value was established pre-pandemic and before the condemning findings of the NSW Bergin inquiry. The inquiry’s report states that Crown’s Melbourne and Perth casinos had been permeated by organised crime groups who launder money; this information was confirmed by an investigative report from The Age and The Sydney Morning Herald journalist Nick McKenzie.
The Bergin inquiry deemed Crown unfit to operate its Sydney licence, and the company was forced to halt the planned reopening of its casino floors. There are currently Royal Commissions reviewing Crown’s licences in Victoria and Western Australia.
Considering these developments, it is understandable that the value of Crown’s licences may be called into question and puts Blackstone’s seemingly miserly bid in firm perspective.
Crown’s licences aren’t worth what they used to be due to a recommendation in the Bergin Report to ban junket operators, some of which have been linked to organised crime. Crown Sydney’s particular business model relied heavily on revenues from international tourism, and specifically junket operators who bring in high-roller clients.
Under Crown’s Sydney licence, the venue may not operate any poker machines, in contrast to its competitor, Star Entertainment, which holds the other Sydney casino licence. Speculation that the smaller Star could put in a bid for Crown is rife.
While this is a possibility, it is widely regarded as an unlikely outcome as it would make more sense for Star to pursue Crown’s Sydney assets.
Star stands to gain the most out of a potential Crown Sydney break-up as it is a known quantity to NSW’s gaming regulator and more critically, holds a licence to operate poker machines in the city. This means that poker machines could make their way to Crown Sydney, off-setting lost revenue from the junket operator ban.