Crown share price: Implications of Oaktree’s Funding Proposal
We examine what Oaktree Capital Management’s funding proposal may mean for the casino operator.
Crown Resorts Limited (ticker: CWN) on Monday revealed that it had received a proposal from alternative asset specialist Oaktree Capital Management.
The basics of this proposal?
According to the announcement, Oaktree approached Crown with a funding commitment, of up to $3.0 billion, aimed at helping Crown buy back shares owned by Consolidated Press Holdings Limited (CPH).
The funding commitment, which would be facilitated through a structured instrument, would allow Crown on a selective basis to buy back some or all of the outstanding CWN stock held by CPH.
The proposal for the funding commitment is non-binding, preliminary, was unsolicited, and Crown’s Board has yet to form a view on its merits. The company further pointed out that any buybacks would have to be approved by the Crown Board.
For reference, CPH is a private investment company well known to be used as a business vehicle for the Packer family empire. It currently holds a 37% stake in Crown.
In 2018 James Packer stepped down from the CPH Board.
According to Dun & Bradsheet CPH was founded in 1954, has 62 employees and in 2020 generated ~$11 USD million in sales.
Ultimately, it’s been a busy period for Crown. In late March the company received a takeover proposal from Blackstone, another leading global investment firm.
The indicative price of the offer was $11.85 per shar – to acquire all of Crown’s outstanding shares. That offer represents a significant premium to what CWN was trading at, at the time. The stock, unsurprisingly, surged in response.
The company announced some modifications to the proposal offer in mid-April, with Blackstone modifying the regulatory Approval conditions of its proposal.
One of the key points of these new conditions was that Blackstone required that none of:
'Crown's VIC or WA casino licenses is, or is threatened to be, cancelled, suspended or surrendered (or subject to a similar action) or ILGA confirms, or threatens to confirm, that Crown's NSW license is not be granted (or subject to a similar action).'
As we wrote previously, while the market has responded with optimism to the Blackstone takeover bid, there remains two key points of uncertainty for the casino operator, including:
- AUSTRAC's ongoing investigation into Crown – which is chiefly focused on customer due diligence and AML/ CMF matters.
- A royal commission into Crown’s Perth and Melbourne casinos. The commission commenced in late-March.
That aside, over the last month the Crown share price is up approximately 21%, trading just above the Blackstone offer price.
CWN is up 48% in the last year.
Trade Crown long and short with IG today.
Create an IG trading account or log in to your existing account to get started now.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Live prices on most popular markets