SYDNEY -- A bidding war for Crown Resorts has broken out even with two of the Australian casino operator's three main properties shuttered and regulatory probes clouding its future.
U.S. private equity group Blackstone, which already holds just under 10% of Crown's shares, in March offered to buy the rest for 8 billion Australian dollars ($6.18 billion), or AU$11.85 a share.
Last month, American rival Oaktree Capital offered to provide up to AU$3 billion in funding, equivalent to about AU$12 a share, to Crown to buy out the 37% stake held by leading shareholder James Packer, whose involvement with the casino company has come under regulatory criticism.
Local media suggest an Australian investment fund is also considering making an offer for the casino company.
The bids have brought Crown's ASX-traded shares suddenly up to their highest level since the early days of the COVID-19 outbreak. The shares closed Wednesday at AU$12.17, up from a low of AU$6 in March 2020.
The competing offers come against a string of bad news, including most recently a AU$1 million fine from Victoria state regulators for failures to properly oversee junket agents and an order by Western Australia to close the Crown Perth casino following the discovery of new COVID cases in that city, just two days after it had reopened.
More ominously, Victoria and Western Australia have launched early reviews of Crown's suitability as a state-licensed casino operator, with Victoria set to start public hearings on May 17. The moves follow New South Wales regulators' finding in February that Crown was not fit to run a casino in a new AU$2.2 billion hotel it opened in Sydney three months earlier due to its failure to prevent money laundering at existing properties and poor corporate governance practices.
Like its gaming peers around the world, Crown has seen its financial results battered by the pandemic amid repeated closures and restrictions on travel, especially from China, a key source of high rollers. For the six months to December, Crown reported a net loss of AU$120.9 million after revenues plunged 62.1% to AU$581 million.
Yet while Crown's valuation on a price-to-earnings basis still trails that of Macao casino operators, the two American offers underscore its attraction as a defensive, cash-generating investment at a time casinos are reopening as COVID vaccination efforts advance. Crown has said its board is considering both proposals.
"I definitely expect a better offer for the company," said Jun Bei Liu, portfolio manager at Australia's Tribeca Alpha Plus Fund, which holds Crown shares. "The price (now) is quite opportunistic. I believe it will be higher."
Crown Melbourne is Australia's largest casino and Crown's market value remains well above that of rival Star Entertainment Group.
"The private equity players have seen value that can be unlocked," Liu said. "We know a gaming license is very important, but it is really the inherent value sitting within those assets that is quite substantial."
While Crown's well-appointed casino hotels are valuable as real estate, the company's rising shares appear to reflect expectations it will hold onto its rights to keep taking bets in Melbourne and Perth as well.
David Green, previously chair of the state gaming authority in South Australia and now head of Newpage Consulting, noted that the state governments in both places count on tax revenues from Crown's operations.
"I think Crown will retain its casino licenses in Victoria and WA (Western Australia)," he said.
Many also see signs that Crown may be cleared to open its gaming tables in Sydney by late this year. Under pressure from the New South Wales regulator, the company's chief executive and five board directors resigned and Packer last month agreed to make commitments not to exert influence at Crown.
"Crown is required to undertake significant change to satisfy the Authority that it is on a pathway to regain suitability to hold a gaming license," said Philip Crawford, chair of the New South Wales Independent Liquor & Gaming Authority last week after extending interim liquor licenses for Crown Sydney through October.
"It will take time for Crown to fully implement that change and for the Authority to give it proper consideration before determining the most appropriate course of action," he said.
Angus Gluskie, managing director at White Funds Management, is among the shareholders expecting the clouds over Crown could clear.
"Potentially, if we saw changes in ownership and changes in management resulting from a bid or offer from another party, that can solve some of those issues that currently sit there," he said.
Crown, though, has been in the sights of bidders before. U.S. casino operator Wynn Resorts in 2019 offered to buy the company for AU$14.75 a share, or AU$10 billion, but abruptly backed off when Crown publicly disclosed the bid.
Later that same year, Melco Resorts & Entertainment, which had had a joint venture with Crown covering casino hotels in Macao and the Philippines, reached an agreement to buy 19.99% of Crown's shares from Packer for AU$13 a share. After taking ownership of an initial half of the stake, Melco fully retreated in the face of regulatory inquiries into its own governance as well as Crown's junket troubles, selling out to Blackstone.