Do NSW and Victorian MPs even care that the world’s biggest private equity firm is about to spend $10 billion swallowing Crown Resorts, one of the most politically and socially sensitive public companies in Australia?
After raising concerns by email with all NSW and Victorian MPs in recent weeks, not one has bothered to reply.
When New York’s Blackstone locked the Crown Resorts board into a binding agreement for a $13.10 a share takeover bid on Monday, the media were all over the story. As usual, the media billionaire support network kicked into gear as outlets controlled by Kerry Stokes and Rupert Murdoch offered a supportive tone to the idea that James Packer would get a $3.3 billion cash payday that he clearly doesn’t deserve.
The market remains sceptical about regulatory problems because Crown Resorts shares closed at $12.56 last night, a 54-cent, 4.1% discount to the $13.10 offer price. Perpetual, the biggest institutional holder, sprinted to the exits on Monday when it dumped 10.7 million shares at an average price of $12.65, pocketing $135 million and reducing its stake from 9.22% to 7.64%.
Blackstone is a ruthless global firm led by 75-year-old executive chairman Stephen Schwarzman — a loyal mate of Donald Trump — who is worth an estimated $25 billion. Do the NSW, Victorian and Western Australian governments really want this bloke running their Crown casinos, particularly when he has competing casinos all over the world, including in colourful jurisdictions such as Mexico, Peru and Colombia?
Blackstone has been deeply engaged with the regulators for months but none of the state governments are saying anything publicly.
The three Blackstone executives named in Monday’s 123-page “scheme implementation deed” are the Sydney-based Australian property head Chris Tynan, who studied Law at UNSW, Alan Miyasaki, an American based in Singapore who is running Blackstone’s Asian property operations, and Richard Blair, an Englishman based in Hong Kong who is Blackstone’s general counsel for Asia.
I emailed all three on Monday to ask who they were putting up for probity tests with the various state-based casino regulators to serve on the Crown Resorts board and run the company. A PR person replied with “no comment”.
This is simply not good enough. If Blackstone wants the privilege of taking on these lucrative monopoly casino licences it needs to open itself up to public scrutiny. Private equity is far less transparent and accountable than ASX-listed companies and if Blackstone wants to take out Packer and Crown’s 60,000 retail shareholders, it needs to commence a serious charm offensive.
The Crown Resorts board promised to cease making political donations in March 2021, but there’s nothing stopping Blackstone continuing that great Australian gambling industry tradition of showering the Labor and Liberal parties with donations to get whatever they want.
One sensible compromise would be to allow Blackstone (also the world’s largest real estate owner) to buy all the Crown property assets and then lease them back to the ASX-listed Crown Resorts to continue operating them. This would retain Australian control of the gambling operations, with the benefit of all the transparency that comes from being an ASX-listed entity — releasing audited results twice a year and complying with Australia’s excellent continuous disclosure regime for public companies.
Crown has been a public company since 1994. It just doesn’t seem right that it will be allowed to disappear from public view just because controlling 36.8% shareholder Packer has been told by the Victorian and NSW regulators that he has to sell down.
If Packer wants out, history suggests it would be an unusual government that stood between him and a huge exit. However, the states should impose strict conditions on any sale, such as a requirement that the operating casinos be returned to the ASX within five years.
Then there is the question of local control over the three casinos. For instance, Crown Melbourne has its own constitution which effectively gives the Victorian government power to veto the appointment of any director. Indeed, royal commissioner Ray Finkelstein also recommended that Crown Melbourne should have a majority of independent directors not associated with the parent company, Crown Resorts.
The existing structure (strengthened by Finkelstein’s recommendations) requires all important decisions to be made by the Crown Melbourne board and executives — and this cannot be delegated to others, be they Blackstone representatives in Asia or even Schwarzman in the New York head office.
Then again, given the history of weak state regulation of Crown Melbourne, who could be sure this would even be enforced? On Monday Martin Pakula, Victoria’s Racing and Major Projects Minister, was still citing the Victorian Commission for Gaming and Liquor Regulation as Crown’s regulator.
It actually changed to the Victorian Gaming and Casino Control Commission on January 1. It has a stand-alone casino division and no longer regulates Victorian liquor licensing. So far, it hasn’t stood up and said anything about Blackstone’s bid and you have to wonder if it is equipped to properly evaluate the deal.
Ultimately, Premier Dan Andrews has long been mates with Packer and as with so many things in Victoria, it will probably come down to his call. He should say no and tell Packer to sell out for a lower price on the open market.
