US private equity giant Blackstone has made a good play for Crown Resorts but will need to raise its latest takeover offer from $8.46 billion, an investment expert says.
Blackstone on Friday was revealed to have offered $12.50 per share in its third unsolicited bid since March for the beleaguered casino operator.
The proposal comes as a royal commission examines whether Crown is fit to run the Perth casino. Inquiries in NSW and Victoria have found the company allowed criminal activity such as money laundering through its Melbourne and Perth casinos.
Forager Funds Management chief investment officer Steve Johnson was not surprised Blackstone was trying again after Crown was allowed to retain its Melbourne licence.
"With the uncertainty in Western Australia, it's a good time to put the safety of cash in front of shareholders," he said.
"I'll be surprised if $12.50 per share is the price that gets it done."
Mr Johnson said Crown had not traded at fair value on the share market for a long time.
This was because big fund managers would not buy significant numbers of shares due to environmental, social and governance concerns.
Yet Crown's assets remain highly valuable.
Mr Johnson said these included Crown's land in Melbourne and its casino licences.
"Crown enjoys extremely valuable monopolies in Melbourne and Perth," he said.
"It's almost impossible to get a casino licence out of a government, so Crown doesn't face the competition other businesses do."
Blackstone is prepared to do the deal even if Crown's regulatory issues continue, subject to a few conditions.
Mr Johnson noted the eagerness.
"Blackstone is trying to make it as easy as possible for shareholders to accept this proposal," he said.
The takeover conditions include a unanimous recommendation from the Crown board and due diligence by Blackstone.
Crown's board told the ASX it had not yet formed a view on the proposal and would engage with stakeholders and regulators.
Blackstone currently holds 9.99 per cent of shares in Crown, which it bought in April 2020.
Any deal would also require approval from casino regulators in Victoria, NSW and Western Australia.
In NSW, an inquiry by former judge Patricia Bergin in February found Crown was unfit to run a casino at its Barangaroo complex in Sydney.
The regulatory troubles have led to a clean out of the Crown Resorts board and the loss of its chief executive and chair.
Meanwhile coronavirus lockdowns have restricted earnings. The company posted a $261.6 million full-year loss for the 2021 financial year.
Crown shares on the ASX were up 16.77 per cent to $11.56 at 1604 AEDT.