Australian casino operator Crown Resorts has accepted a nearly $6.3 billion takeover offer from U.S. private equity firm Blackstone Group (BX), according to a Reuters report.
Blackstone already owns an approximate 10% stake in Crown. Billionaire James Packer is Crown’s largest shareholder with a stake of about 37%. Crown shareholders are expected to vote on the deal in Q2 2022. As the deal requires 75% shareholder approval, Packer’s backing would be crucial. The deal will also be subject to regulatory approval.
A Troubled Business
Blackstone will take over Crown at a time when the casino operator is facing regulatory scrutiny over its past practices. For example, probes found that Crown knowingly conducted business with criminal organizations and misled authorities about those dealings, according to the report.
As a result, the gambling license for Crown’s Sydney casino has been suspende, and Crown’s Melbourne casino is required to operate under the watch of a government-appointed overseer for two years.
From Media to Casino Business
Crown was formed from what was once Australia’s media powerhouse, the Australian Consolidated Press. The media empire was started by James Packer’s grandfather Frank Packer in 1936. Frank’s son Kerry Packer ran the family media business until his death in 2005. When James, Kerry’s son, took control of the business, he decided to split it and sold the media unit to focus on running casinos. But the casino business soon ran into regulatory headwinds as it attempted a rapid global expansion.
In January, Goldman Sachs analyst Alexander Blostein reiterated a Buy rating on Blackstone stock and raised the price target to $160 from $155. Blostein’s new price target suggests 29.48% upside potential.
Consensus among analysts is a Moderate Buy based on 8 Buys and 4 Holds. The average Blackstone Group price target of $152.30 implies 23.25% upside potential to current levels.
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