Blackstone’s End Game for Crown Resorts Could Be Liquidation

Posted on: February 17, 2022, 09:44h. 

Last updated on: February 17, 2022, 09:56h.

Erik Gibbs Read More
Expertise: Asia Pacific Gaming, Gaming Business, Global Gaming.

Crown Resorts’ board of directors has accepted the $6.3-billion purchase bid from Blackstone Group. Now, rumors are spreading that the investment firm may choose to liquidate all of the Australian casino operator’s assets.

Stephen Schwarzman
Blackstone Group CEO Stephen Schwarzman participates in a panel discussion last March. The executive and the rest of his team are analyzing what to do if regulators approve the company’s purchase of Crown Resorts. (Image: Seeking Alpha)

Blackstone Group has increased its interest in the global gaming space over the past couple of years. It has set its sights on some minor targets, as well as some larger ones. The company’s attempts to expand its portfolio haven’t always been successful. However, Blackstone scored a coup when Crown’s board agreed, in theory, to its multibillion-dollar bid.

Crown Teeters Down Under

Crown’s operations are in a state of shambles. The company already had its license suspended in New South Wales. It is on probation in Victoria, and is still waiting for the results of an investigation in Western Australia.

These issues provide a great deal of uncertainty regarding the casino operator’s future. However, Blackstone sees it as a potential gold mine.

At least one industry analyst believes that the investment firm isn’t looking at Crown as a means to make money directly from gambling. Instead, it could be an opportunity to buy the company and then sell its assets, resulting in an even larger windfall.

The Sydney Morning Herald quotes iGamiX Managing Partner Ben Lee as stating that Blackstone has no desire to run a casino. On the contrary, the analyst points out that Blackstone would more likely bring in a team of experts to dissect the operations, reduce costs, and then sell Crown’s assets.

[Blackstone] will slash and burn, they will cut costs and make it very lean, fix it up, and then sell it off,” said iGamiX Managing Partner Ben Lee.

This doesn’t necessarily mean that Blackstone expects Crown to disappear from the Australian landscape. The company’s senior managing director for Australia, Chris Tynan, pointed out earlier this week that the operator is a significant part of the Australian economy and deserves to maintain its position after a thorough house cleaning.

Blackstone to Follow Existing Business Model

Lee bases his analysis on Blackstone’s history. The company purchased the Cosmopolitan on the Vegas Strip in 2014 and gave it a facelift. Following a total investment of around $2.3 billion between the purchase and the upgrades, Blackstone sold the property for $5.65 billion last year. MGM Resorts International bought the casino and hotel operations, while the real estate assets went to a real estate investment trust.

Blackstone did the same with Hilton Worldwide. It owned a significant stake in the global hotel chain before selling it a few years ago. The sale proved advantageous, as it earned a profit of $14 billion when it sold its holdings.

Blackstone is no stranger to the gaming industry. It understands that it might have to sit on its assets for a while before turning a profit. However, adding Crown to its portfolio will give it considerable strength.

Before that can happen, though, regulators in Australia will have to sign off on the purchase. That isn’t likely to happen quickly, especially with Western Australia still to release the results of its Crown investigation.