Blackstone, the world’s biggest private equity firm, finally wrapped up its $9.5 billion takeover of Crown Resorts on June 24, paying a hefty $3.3 billion to James Packer. In the end, the offer of $13.10 a share was a fair price given all of Crown’s problems — and I was delighted to pocket all of $131 for my 10 shares.
The troubled billionaire now has a much less complicated empire and is completely debt-free for the first time since inheriting his father’s fortune in December 2005 and agreeing to give his sister Gretel $1.25 billion in cash, property and shares back in 2015.
Packer last week turned to his favourite media outlet, Rupert Murdoch’s The Australian, to signal that he plans to be back in Australia with his family next March — and back in the public eye as well, participating in public debates about China, mental health and artificial intelligence, and snapping up shares in ASX-listed companies.
Given all the scandals that were exposed by Nine’s Nick McKenzie and in the three subsequent Crown royal commissions, it is disappointing but not surprising that ASIC has taken no action against any of the Crown personnel responsible. Indeed, no one in the mainstream media is even criticising the corporate plod about this. Packer almost seems to be a protected species, particularly in the Murdoch press and the empire controlled by his billionaire buddy Kerry Stokes.
Rather than worrying about ASIC, James Packer was on the front foot in The Australian, declaring that he intends to resurrect his battered reputation.
“In 10 years, and hopefully well before then, I hope to have rehabilitated my reputation in Australia and elsewhere,” Packer told The Australian. “I’ve made too many mistakes and I’ve got some big things right too … I’m feeling excited about starting my Act 3 … my Crown chapter is over.”
Packer is coy on his business plans besides disclosing that Magellan co-founder and fellow troubled billionaire Hamish Douglass has joined his investment committee.
“Hamish and I will be looking at the listed market closely for opportunities. My timing on the Crown sale looks lucky and I know I can’t make the same mistakes I’ve made in the past when cash burnt a hole in my pocket.”
This was a reference to the spending spree blunders that the Packers made after selling out of Channel Nine to Alan Bond for $1 billion ahead of the 1987 stockmarket crash and the similar blunders that James made after selling control of PBL Media to private equity firm CVC for $5.5 billion ahead of the 2008 global financial crisis.
Under Packer’s exclusive stewardship since 2005, Crown has not been a stellar investment, although those early Crown shareholders who accepted the all-scrip PBL takeover offer in 1999 have done relatively well because PBL shares were only trading at around $9 at the time.
They participated in the excellent CVC deal and benefitted from News Corp overpaying for the Packer media rump, Consolidated Media Holdings, in 2012 when it bid $3.50 a share, shelling out almost $2 billion — 45% of which went to James Packer personally.
The 60,000 Crown retail shareholders also benefitted from the circa $2 billion in capital profits that the company booked from floating, building and then exiting the Melco Macau joint venture with the Ho family, although this ultimately led to Crown’s regulatory troubles after Packer tried to emulate the lavish Macau properties in Australia and attract their colourful, money-laundering clientele as well.
Crown’s three Australian facilities were over-capitalised with exorbitant gold plating that did not deliver a reasonable return when controlled by Packer, particularly when the high-roller business imploded. However, if Blackstone is silly enough to pay almost $10 billion to own them, more fool them.
In the end, Packer had no choice but to sell his controlling stake as he would never have been allowed back on the board by the state gambling regulators, and without the sale to Blackstone it may have taken even longer to be given a licence to open Crown’s new Sydney casino, which has now been granted.
As for Act 3, it wouldn’t be a surprise if Packer wandered back into the media game, even partnering up with his old mate Lachlan Murdoch.
With 91-year-old Rupert Murdoch now in his dotage and getting divorced for the fourth time, a historically meaningful option for Packer would be buying into News Corp and/or Fox Corp to provide investing support for Lachlan Murdoch, the Sydney-based co-chairman of both outfits, who may face a challenge from his adult siblings when the patriarch passes.
Lachlan and James are longtime buddies who experienced embarrassing losses at One.Tel and Ten Network Holdings together and jointly controlled Foxtel for 15 years. They even briefly countenanced a $3.3 billion joint privatisation deal of Consolidated Media Holdings in 2008 before the GFC crisis scuttled it.
And they appear to remain close and cooperative to this day, as was evidenced by the typically favourable Packer coverage served up by The Australian in recent days.
As long as Lachlan Murdoch is co-chair of News Corp, don’t expect to read a searing editorial in any News Corp newspaper blasting ASIC for failing to take action against Packer for his failings at Crown.
Instead, from ASIC’s point of view, Packer is all clear to join the News Corp and Fox Corp board, although gambling regulators may have something to say about that given the Murdoch empire’s increasingly aggressive moves into the gambling industry.
