- Blackstone revised its offer by 4% last week to $12.35 per share
- Crowns EBIDT last year was the lowest since listing in 2007
- The Star Entertainment Group is offering a $12B merger
Crown Resorts Limited: (ASX: CWN) has formally rejected the acquisition proposal from US private equity firm Blackstone, in the midst of a bidding war for the casino operator.
In a statement released to the ASX today, Crown said the Revised Proposal “undervalues Crown and is not in the best interests of Crown’s shareholders”. The Board added that the decisions took into consideration various scenarios, such as several regulatory inquiries in Victoria and Western Australia, which are currently underway.
Just last week on 10 May, Blackstone revised its proposal which included an indicative price of $12.35 cash per share – up $0.50 compared to the previous offer price of $11.85.
When declining the offer, the Board took into account other factors impacting Crown’s value. For example, Crown Sydney has seen $2 billion of its $2.2 billion gross project cost spent to date. Although opened on 28 December 2020, this was only done so in a restricted capacity and, of course, the casino has not opened due to not receiving a licence.
The Board also referred to the impact of the pandemic on its operations – especially for Crown Melbourne which was closed for most of the second half of last year. Crown’s EBITDA was $142 million in the second half of last year compared to $381 million during the same time last year. Last calendar year’s earnings were the lowest for any year since Crown was listed back in 2007.
Additionally, due to the sale of Crown Sydney apartments, Crown’s debt has been substantially reduced with the company planning to repay the $450 million project finance facility that was used to facilitate the construction of Crown Sydney by the end of this financial year.
The Board argues the takeover premium being offered was still low – the previous offer represented a premium of 19% to the volume-weighted average price of Crown shares between its mid-financial year results and the announcement of the original proposal. While the Revised Proposal increased by 4%, the ASX200 has increased by 6% during the same timeframe.
Will Crown be a Star?
Crown is currently reviewing a Merger Proposal from The Star Entertainment Group, which owns The Star in Sydney, the second-largest casino in the country after Crown Melbourne. The merger would be worth $12 billion and has “requested Star to provide certain information to allow the Crown Board to better understand various preliminary matters.”