Bidding war set to erupt at Crown Resorts
Having dodged a bullet with its Victorian casino and gaming licence, Australia’s largest entertainment group, Crown Resorts (ASX: CWN) is back. Shares have risen from $8.64 in July this year to $11.33, staging a remarkable recovery of around 31%.
Despite being brought to its knees by the Royal Commission investigating its suitability to hold its casino licences, and given one more chance, Crown Resorts appears to have taken it on the chin and is on the mend. It’s even reignited control of the venue, after another bid was lobbed, at $8.46 billion from private equity outfit Blackstone, on Friday.
It’s been a rough ride for Crown, which has had three damaging years riddled with scandals, money laundering, human trafficking allegations, and a Royal Commission that almost saw the cancellation of its casino licences in Melbourne, Sydney and Perth. But with a new board, organisational framework and the appointment of a government “special manager” to oversee Crown for the next two years, the worst seems to be behind the casino operator. Uncertainty has been removed and the path forward is a lot clearer.
This increased certainty has Crown fielding yet another takeover offer. Blackstone already has a 10 per cent stake of Crown and is its second-biggest shareholder. It offered a sweetened takeover offer of $12.50 cash per share, setting up the field for a bidding war with Star Entertainment Group (ASX: SGR).
Crown did knock-back the bid, saying it was too low. However, taking the company private makes sense and is the likely outcome.
Ord Minnett has a “buy” recommendation with a target price of $15.00. The broker highlights the fact that the share price is below the bid price of $12.50, implying the market is aware of potential risks. The offer is also conditional on receiving approval from regulators.
Crown’s dismissal of the offer means a bidding war is the most likely outcome. That also implies there is further upside in the share price.