The Packer dynasty could relinquish its hold on Australia’s largest casino company Crown now that Las Vegas-based Wynn Resorts has put forward a takeover proposal.
The ASX-listed Crown Resorts controls both Crown Entertainment and various gaming complexes in Melbourne and Perth and is currently constructing a $1 billion complex in Sydney’s Barangaroo.
The proposal is an interesting one given the breadth of Crown’s holdings, says Your Money business editor James Daggar-Nickson.
“As the owner of a number of high-class assets, and with the Sydney Barangaroo project to potentially be the jewel in the crown, Crown is likely seen as strategically attractive from a relative value and geographical perspective – the latter as a platform into the sizeable Asian market,” he said.
“The global gaming sector has for a while now been tipped for significant consolidation as casinos suffer from a dip in VIP gaming and rising costs. Crown Resorts hasn’t been immune to these pressures and its share price has reflected that,” he added.
With the Packer family having divested many of its Consolidated Press Holdings assets, Crown remains its largest investment with its stake valued at $4.4 billion.
While James Packer resigned from the board of Consolidated Press in the middle of last year, the decision to sell is likely to rest with him.
“The key to any deal will be James Packer, Crown’s largest shareholder with control of about 46 per cent of shares through his Consolidated Press Holdings vehicle. He stepped down from the board (for a second time) last year and has retreated further from corporate life in an attempt to manage some personal challenges and battles with mental illness,” Daggar-Nickson explained.
The preliminary offer, if accepted, would see Crown be acquired for 50 per cent cash and 50 per cent Wynn shares, with the proposal causing Crown shares to surge more than 20 per cent during trade on Tuesday.
That stake in Wynn, which generates around $1 billion in profit through its Las Vegas resorts, could help sweeten the deal.
“Considering those issues, the Wynn offer may be attractive as he’d walk away with a sizeable cash windfall, estimated to be as much as $2 billion and a large stake in Wynn. The latter providing him with the global gaming reach he’s always coveted but was unable to attain through Crown,” Daggar-Nickson says.
“However, a deal could be seen as a tacit admission that Crown Resorts was a failure and would represent the sale of his last major asset. Of course, history shows James Packer isn’t afraid of making big calls… Perhaps this is an opportunity for another pivot such as his first big one from media to gaming.”
Watch Trading Day‘s breaking news coverage of the Wynn-Crown deal in the video above.