On Monday, Crown Resorts reported an annual revenue loss and revealed that the company is no longer speaking with Oaktree Capital about James Packer’s stake in the company. The loss was already known to the Australian casino operator and the ceased discussion with Oaktree just adds to the negative cloud over the company. The private equity was planning to buy the $2.3bn stake of Packer but has now backed out.
Struggling to Move Forward
The announcements come at a time when Crown Resorts is struggling to move forward. The company is trying desperately to rebuild its image while dealing with inquiries by the Royal Commission. Crown already lost its license for casino gaming in Sydney, before it even opened a brand-new property for gaming.
An inquiry found that the company was allowing money laundering to take place for many years, something that gaming regulators strongly oppose. Regulators expect casino operators to have strong anti-money laundering policies in place to avoid any issues. Crown did not and turned a blind eye to the activity.
Crown Resorts is also under investigation in Perth and Melbourne, which adds to the issues. On top of that, the company has bit hit by the COVID-19 pandemic just like everyone else. Dealing with multiple issues at once has proved challenging for the company.
Oaktree has not stated why the deal failed, nor has Crown Resorts. Back in June, it was revealed that the American investment equity firm had improved its offer to Crown. In April, the firm had proposed a $2.31 bid for shares.
The proposal was increased in June to $2.38 billion with $1.53 billion of the amount to come from a private loan. The remaining amount of $845 million was to be converted to shares in Crown Resorts Limited at a set price of $9.98.
It’s unclear what caused the abrupt change for Oaktree, as the company seemed to be gung-ho on closing the deal, especially after increasing its proposal bid.
As far as the annual net loss, we know the company took a hit of A$261.6 million ($191.3m). This was a significant drop if you consider the A$79.5m profit last year.
Crown did say that the Perth casino was able to rebound after the latest COVID-19 restrictions were loosened. However, the operating environment remains uncertain. Analysts feel that the Perth performance will be a precedent in regards to when Crown Sydney and Crown Melbourne venues reopen.