more fronts open in Crown’s battle for survival

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Crawford – who was compelled by the darling deal Crown signed with the NSW government in 2014 to work with Crown to try to restore his license rather than just revoke it – said he was “amazed” by what Coonan has achieved over the past four months installing new people, new systems and a new culture in the company.

“I didn’t know in February if they were going [get the licence back] … the old management, I think, wanted to fight, ”he said at a press conference.

But even as the regulatory storm in New South Wales eases, royal commission clouds are gathering in Victoria and WA. In Victoria, respected former judge Ray Finkelstein was given a tight deadline to report by August 1 and was instructed to avoid “unnecessarily duplicating” Bergin’s work. But “The Fink” – as he’s known in Melbourne legal circles – delves deep into the same thorny issues of money laundering and criminal infiltration that prompted NSW to suspend Crown’s license.

Requests from the two Royal Commissions for thousands of documents sent Crown Allens’ law firm and a raft of advisers into overdrive, which a person familiar with the work said was a ” logistical nightmare ”.

“It puts everyone under tremendous pressure,” the legal source said. “The Royal Commission on Financial Services was not just about one bank.

There is a risk that royal commissions will uncover evidence of wrongdoing that Bergin did not find in his investigation. Finkelstein said the “most important” area of ​​his investigation is one that Bergin has not touched on at all: how Crown’s agreements deal with gambling addiction – something critics have long said Crown does not had not done correctly.

“They are the largest gaming-related damage production plant in the country,” says Charles Livingstone, a gaming scholar at Monash University. “On a systematic basis, people are encouraged to play far beyond their means at levels quite unimaginable for ordinary people, and Crown is being rewarded for doing so.”

Crown Melbourne is licensed to operate up to 2,628 poker machines, 24 hours a day, resulting in $ 462 million in player losses in 2019. Crown took home $ 441 million from the big players this year – there and nearly $ 772 million on its ground floor. table games.

Livingstone says Crown’s loyalty program – which rewards customers with free tickets to sporting events and other hospitality as they spend – was a way to encourage people to gamble excessively, and staff not intervene when people sit at poker machines spending too much, for too long.

The Victorian Inquiry is expected to examine the Victorian Commission for Gambling and Liquor Regulation’s oversight of Crown during its first week of hearings, including how it investigated the arrest of 19 Crown staff in China in 2016, and will then move to Crown’s “junket”, which is now complete. “Partnerships. So far, he has called only one prosecution witness: Nick Stokes, his head of financial crimes.

A Crown spokesperson declined to comment “out of respect for the Victorian Royal Commission and its processes.”

The commission gathered evidence from gambling addicts who were injured in the Crown as well as whistleblowers, according to people familiar with the preparations for the investigation.

There are also a series of recent public scandals to examine, including Crown which has masked buttons on a small number of its poker machines so that bettors can only place minimum and maximum bets; and give players Crown branded plastic picks to jam buttons and keep their pokies spinning continuously.

The first week of the Western Australian Royal Commission focused on the state’s gambling watchdog, which is under pressure over how it is letting money laundering take place at Crown Perth.

Going through these surveys is only complicated by the group’s takeover bids.

US private equity group Blackstone – which already owns 10% of the Crown – kicked off the race in March by launching a full takeover bid at $ 11.85 per share, which passed over the weekend. at $ 12.35, valuing the company at $ 8.3 billion.

Despite the multiple offers, sources close to Blackstone’s offer claim that Crown’s board of directors has not made substantial commitments with the U.S. company, even though the rise in Crown’s share price (13 $ Friday) suggests investors are betting on a deal.

Blackstone was starting to grow impatient with the lack of commitment, and the fact that Crown disclosed limited details about its offer and a rival proposal by U.S. fund Oaktree to fund a $ 3 billion buyout of James Packer’s shares, according to a source.

“It’s going to go on for two months soon and the market is still trading above the indicative bid price – so it’s fair to say that they expect something to happen – but Blackstone is standing there with no commitment.” said the experienced negotiator.

Some wonder if the Crown’s board of directors – which lost most of its experience with mergers and acquisitions when five directors resigned after Bergin’s final report – can handle both the interests of business and regulatory oversight.

“Is it inexperience, is it some sort of agenda?” It does not give Australian companies a good light to allow this to drift, ”said one shareholder.

But despite the call to action, Coonan and his board, who are advised on takeover bids by UBS bankers, do not let suitors distract from what they see as the main game.

“Helen is focused on reform and adequacy, and it seems to be paying off,” said a person close to the board.

A merger of Crown and The Star would create the seventh largest casino group in the world, with around 30,000 employees (more than Qantas) and seven resorts and casinos in Sydney, Melbourne, Brisbane, Perth and the Gold Coast.

The Star says the combined $ 12 billion group could tap into new overseas tourism markets as the travel industry recovers from the COVID-19 pandemic and provide a faster solution to Crown’s regulatory problems , given the Star’s long history of running casinos in Sydney and Queensland.

But the proposed super-monopoly will face a tough test from the Australian Competition and Consumer Commission.

“If you think having a monopoly in Victoria is bad enough, think of one where the incumbent is twice as big,” says Ben Lee, the casino industry’s leading consultant. “There would be no way for the government to address the prospect of deregulating this segment of the economy.”

Crown Sydney was originally billed as a VIP-only casino when it licensed the city’s second casino in 2013, but Lee says it’s no longer a viable business plan. Crown’s ability to attract ultra-wealthy Chinese gamers was hit hard when police arrested 19 of its employees for gambling offenses in 2016, and its rescue plan – “junket” tour operators – was shattered by it. Bergin investigation.

“So with the VIP market more or less gone for Crown, they’ll go after the Star’s main lobby customers,” says Lee. “Star is desperate to keep a well-funded and potentially well-managed competitor from coming online, and this represents the best opportunity for them to avoid a competitor.”

It is increasingly believed that Blackstone and The Star will eventually work together, with the former owning the properties and the latter managing the casinos. Blackstone was involved in this type of arrangement in Las Vegas.

Whatever happens to Crown’s licenses in three states, the man with the most influence over its future remains major shareholder James Packer, whose 37% stake is likely to result in a sale or merger. The reclusive billionaire has been looking for ways to sell Crown – the main vehicle of his wealth – for several years.

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Packer agreed to sell to Las Vegas giant Wynn Resorts in April 2019 as part of a 50-50 cash and stock deal valued at $ 14.75 a share, which was torpedoed by a leak. Press. He sold 10 percent of Crown to Melco Resorts in Hong Kong for $ 13 a share a month later. Defeated by probity concerns, Melco sold his stake back to Blackstone for just $ 8.90 a share (the shares traded at $ 13 on Friday, meaning Blackstone still played a winning hand even though it folds back. in the auction competition for Crown).

The former executive chairman agreed to step down from the management of Crown after the Bergin investigation revealed that his disproportionate influence had contributed to the dysfunction of the company, with “dire consequences”.

But even from outside the tent, he will be a key player in any sales process, with his privately held Consolidated Press Holding appointing renowned negotiator Chris Wyke, of Moelis Australia, to assess and negotiate the offers.

The irony of the star now chasing Crown and potentially giving Packer an exit is not lost on Ben Lee.

Kerry Packer missed the initial tender to build a casino in Sydney’s Pyrmont when her bid – managed by son James, then 26 – fell through. In 2012, James sparked a bitter crisis when Crown broke into the share register of The Star (then called Echo Entertainment) in an attempt to split up its NSW license and set up its new casino in Barangaroo.

“The Star Offer would be a pretty bitter pill for Jamie Packer,” says Lee.

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