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Breakingviews - Blackstone suited to be Crown buyer of last resort

Crown Resorts Ltd's flagship tower nears completion at Barangaroo, Sydney, Australia, April 17, 2020. Picture taken April 17, 2020. REUTERS/Stephen Coates

HONG KONG (Reuters Breakingviews) - The Crown Resorts saga could end with a deal after all. Regulators have suspended the Australian casino operator’s gaming licence for its new luxury Sydney complex. As the company and billionaire James Packer consider their options, private equity firm Blackstone looks well-suited to be a buyer.

Delaying the December opening of the $1.6 billion waterfront property raises the spectre of authorities withholding the licence altogether. The company is trying to appease them, by shaking up its board, pay practices and corporate culture. It also vowed to stop working with unregulated junkets that bring high rollers from China.

A year-long inquiry into compliance and governance took a disturbing turn last week, however. Local gaming officials were clearly rattled after seeing fresh evidence of lapses in Crown’s anti-money laundering protocols. Moody’s downgraded its credit rating on Friday.

That intensifies the pressure on $4.6 billion Crown. Finding a new owner might be the best solution, even if it forces Packer to sell the last piece of his family’s empire with the shares down by a quarter over the last year. He has considered cashing out before. Talks with Wynn Resorts fell apart in 2019. And the billionaire agreed to offload a big slug of his stake to former joint venture partner Melco Resorts & Entertainment, before the arrangement unravelled just as the inquiry began.

Blackstone bought a 10% stake in April and has a track record that suggests it could want more. It is no stranger to the gambling industry and knows how to wheel and deal in real estate. It arranged a leaseback arrangement for the Bellagio in Las Vegas which farmed out management, and risk, to MGM Resorts International while it collected steady rent revenue. Blackstone also sold pieces of Hilton Worldwide during its ownership and profitably broke up Sam Zell’s Equity Office Properties after paying $39 billion for it in 2007.

Its lodging nous also might help reposition Crown as it faces the prospect of fewer Chinese VIPs. When they went missing amid President Xi Jinping’s corruption crackdown, the company’s bottom line shrank considerably in 2015. There will undoubtedly be other possibilities for Crown and Packer, but a Blackstone future may be in the cards.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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