Timeliness of potential Crown takeover in the hands of ILGA

The next possible acceptable owner of Crown Resorts will largely be a decision for the New South Wales gaming authority’s number one, Philip Crawford.

The Australian Financial Review reports that the bidding war for control of Crown Resorts will see the Independent Liquor and Gaming Authority chairman emerge from the shadows and potentially play a critical role in the outcome.

A former solicitor at Henry Davis York for many years, before opening a mediation practice in Sydney, Crawford is overseeing the team responsible for due diligence and probity checks for potential Crown buyers.

This involves numerous, complex tasks, including figuring out the potential involvement of Crown’s controlling shareholder, James Packer, under any new ownership, and examining gaming operations as far afield as Colombia.

Private equity firm Blackstone, which owns a 10 per cent stake in Crown, upped its cash bid for Crown by 50 cents to $12.35 a share last Monday.

It is reported that it has already put noses out of joint at ILGA with its statements about the timeline for the regulatory clearance of its bid for Crown.

Crown said on April 13 that “it is the expectation of Blackstone that it will receive probity approval to acquire 100 per cent of Crown from each of the state gaming regulatory authorities by the third quarter of 2021.”

This looked decidedly like the world’s biggest private equity group setting a timeline for Crawford and his team to work to.

This perception, however, could be wrong.

Blackstone actually takes the view that the ILGA process will take as long as it needs to.

It doesn’t seem commercially sensible to be in any way hinting at pressuring the key regulatory body with oversight of the Barangaroo casino in Sydney.

The other issue that could complicate rapid due diligence and probity checks of Blackstone is the fact it owns Spain’s largest gaming company, Cirsa.

It owns a gaming business in Colombia which experts have described as a “tricky” place to do business.

It is understood Blackstone has been madly translating loads of documents to English to help ILGA with its due diligence work.

The Crown Resorts bidding heated up on Monday when Blackstone’s sole all-cash offer was challenged by Star Entertainment Group’s nil-premium cash and share scrip merger proposal that allegedly valued crown shares “in excess of $14 a share”.

The word allegedly is used because there need to be some assumptions made to ensure the price gets to $14.

If you use the share exchange ratio of 2.68 Star shares for each Crown share, the bid valued Crown at $11.65 a share.

The Star’s offer contains a $12.50 per share cash component that is capped at 25 per cent of Crown’s total shares on issue.

Its offer might put Crawford in an interesting position, with due diligence and probity challenges in relation to The Star gaining control of Crown.

Given the outcome of the NSW Bergin inquiry, it would be fair to assume it would be in the interests of all parties for Packer to cut his shareholding in Crown to less than 10 per cent, which is ILGA’s stipulated maximum shareholding of any individual shareholder in The Star.

But if Packer were to get below 10 per cent through The STar offer, it would mean he would have to take up double the amount of cash that he is entitled to have under The Star’s cash and scrip offer.

This comment is based on the fact that The Star merger proposal “would result in pro forma ownership of the merged entity of 59 per cent for Crown shareholders and 41 per cent for The Star shareholders.”

Crawford’s meticulous approach to due diligence and probity could result in decisions that affect not only the outcome of the offer, but its timeliness.