Oaktree Capital Management Offers Crown Resorts $2.32bn to Buy Back James Packer Shares

  • The private equity firm wants to help Crown buy back its founder’s shares for up to AU$3bn
  • The ILGA’s recent Bergin Inquiry into company failings drew on the casino mogul’s influence
  • Packer won’t have to sell his stake in Crown following an agreement with the ILGA last week
  • Crown shareholders are also considering an AU$8bn (US$6.bn) buyout offer from Blackstone
Oaktree logo on phone
Oaktree Capital Management has provided Crown Resorts with another option to consider, offering to buy back James Packer’s shares in the company for up to AU$3bn (US$2.32bn). [Image: Shutterstock.com]

A new option for Crown

James Packer, the founder and current major shareholder of Crown Resorts, could walk away from the company if a new deal goes ahead with Oaktree Capital Management. The private equity firm has offered to help Crown buy back up to AU$3bn (US$2.32bn) worth of its shares from the billionaire.

An inquiry led by the New South Wales Independent Liquor and Gaming Authority (ILGA) brought Packer’s role into question earlier this year. As owner of 37% of Crown, the casino mogul took much of the blame for failings which led to the loss of the company’s Sydney casino license.

shareholders must approve the buy-back offer

Crown confirmed the Oaktree offer on Friday. It would see the business purchase shares from Consolidated Press Holdings Pty Limited (CPH), a private company owned by Packer. For that to happen, Crown made it clear that shareholders must approve the buy-back offer.

The new offer comes as Crown also mulls an AU$8bn (US$6.2bn) takeover bid from The Blackstone Group Inc., another private equity business.

Packer takes the blame

In February this year, the NSW gaming regulator published its 751-page findings on Crown Resorts, otherwise known as the Bergin Report. It confirmed several accusations made against Crown, including the facilitation of money laundering and links to organized crime.

As a result of its findings, the ILGA blocked Crown from opening its new AU$2.2bn (US$1.6bn) casino in Barangaroo. The inquiry ruled that the operator must undergo a number of changes to earn its Sydney license. This led to the resignation of all three of Packer’s board nominees, in addition to CEO Ken Barton.

disastrous consequences for the company”

Packer featured heavily in the Bergin Inquiry’s final judgment. It described the casino mogul as a “deeply flawed” individual, and found that his influence had “disastrous consequences for the company.” As a result, the ILGA has conducted negotiations with Packer’s private company for months regarding the billionaire’s role in Crown.

On Friday, the NSW regulator announced it had reached an agreement with CPH and Packer. The deal will see the casino mogul banned from nominating anyone to Crown’s board until October 2024. It will, however, allow him to maintain his stake in the company.

Two offers in the cards

With Oaktree’s AU$3bn (US$2.32bn) buy-back offer now on the table, Crown could consider removing Packer from the picture altogether without selling the company. Last week’s deal with the ILGA means the regulator will not force Packer to sell down his stake. However, the mogul recently told the Australian Financial Review that he will accept a deal if it is the board’s decision.

Now, Crown shareholders have two offers to consider. In addition to Oaktree’s buy-back option, private equity firm The Blackstone Group bid AU$8bn (US$6.2bn) to purchase the company outright last month. The New York-based company already owns 9.99% of Crown and has other experience in the gambling space, with a number of casino holdings in Las Vegas.

The Oaktree bid would provide Packer with around AU$12 (US$9.33) per share, just above the Blackstone offer of AU$11.85 (US$9.17). However, one Crown shareholder has indicated that this may not be high enough to sway the mogul into selling. As reported by the Sydney Morning Herald, the unnamed shareholder said: “James wants more than $12.”

While the ILGA’s inquiry may be complete, Crown’s troubles are far from over. Two royal commissions are currently underway regarding the company’s Victoria and Western Australia casino licenses. The inquiries will assess whether the operator is suitable to hold permits in Melbourne and Perth. Their reports are due back in the second half of 2021.