Federal Court gives Blackstone green light to acquire Crown for $8.9 billion

Federal Court gives Blackstone green light to acquire Crown for $8.9 billion

Crown Resorts (ASX: CWN) has received the final stamp of approval for the $8.9 billion acquisition with US investment manager Blackstone after the Federal Court ruled the transaction could go ahead today.

The deal, which was overwhelmingly approved by shareholders last month, will see James Packer exit the company and receive a $3.36 billion payday in exchange for his 37 per cent stake in the gambling operator.

The ruling comes less than a week after Western Australian gaming regulators gave the takeover the green light, following its counterparts in Victoria and New South Wales.

While the buyout will see Crown delist from the ASX, the casino giant will be subject to “tough conditions” that align with recommendations from the Perth Casino Royal Commission (PCRC), as well as several conditions set out by the Victorian Gambling and Casino Control Commission (VGCCC).

The PRCR found many of the failings of the Perth Casino overlapped with findings made in Victorian and New South Wales inquiries into Crown, including the facilitation of money laundering, failing to have an effective anti-money laundering program, and permitting junkets with links to criminals to operate at the casino.

As a result, the regulators made a number of recommendations, including that the Crown enhances its reporting of anti-money laundering and responsible gambling activities, report any investigations by any Australian or overseas regulators, and implement new role requirements for executives in the company. 

Both the VGCCC and PCRC have imposed conditions for the takeover to successfully occur, mandating that Blackstone “cannot change its corporate structure and funding arrangements” without approval from either agency.

For Blackstone to take control, the VCGCC has enforced a condition that majority of Crown’s board must be independent and that the US-based private equity giant invest in Crown Melbourne and maintain it as the flagship casino in Australia.

The PCRC has also made it mandatory for Blackstone’s institutional investors to comply with non-interference requirements, meaning they will not be involved in the day-to-day operations of Perth Crown Casino.

In October last year, the Victorian Royal Commission recommended Crown Melbourne appoint a new special manager with "unprecedented powers to oversee Crown, veto decisions of the board, and have unfettered access to all areas of the casino and its books and records".

It also recommended that Crown’s licence be automatically cancelled at the end of the oversight period unless the regulator is clearly satisfied the company is suitable to continue operating the Melbourne casino.

Other suggestions included increasing the maximum possible penalty under the Casino Control Act 1991 from $1 million to $100 million, which led to Crown being slapped with an $80 million fine for illegal conduct.

More recent recommendations from the PCRC included mandatory pre-commitment scheme and play period limits for electronic gaming machines (EGMs), proof of financial capacity for Pearl Room members, and a maximum bet size of $10 for EGMs on the main gaming floor.

However, the PCRC report did not suggest to cancel Crown’s gambling licence, instead detailing remediation activities Crown would need to implement to be suitable to hold a licence throughout the transition phase.

Both Royal Commissions came after the 2020-21 NSW Bergin Inquiry, which probed the group's operations in Melbourne and Perth and deemed Crown unsuitable to hold a licence.

Since then, Crown’s tower on Darling Harbour has only been open for non-gaming activities and areas such as accommodation, restaurants, bars and entertainment.

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