Crown out of suitors as discussions with Oaktree called off

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A recent flurry of M&A interest in Australias Crown Resorts has seemingly come to an end with the company revealing it is no longer in discussions with American global asset management firm Oaktree Capital Management LP.

Oaktree was one of three companies, alongside US hedge fund The Blackstone Group and local casino rival Star Entertainment Group, to express interest in Crown earlier this year, likely sensing an opportunity to pounce with COVID-19 and regulatory concerns keeping the share price low.

Its initial proposal, submitted in June, was for a US$3 billion investment into Crown which the casino operator would then use to buy back the 37% stake currently owned by James Packers Consolidated Press Holdings Pty Limited. The influence of Packer was highlighted as an area of concern by the NSW Bergin Inquiry into Crowns suitability to hold casino license for Crown Sydney.

A revised offer was submitted by Oaktree in June proposing that its AU$3 billion be provided in two tranches, including an AU$2 billion private term loan and another AU$1.1 billion loan convertible into new Crown shares, capped at 9.99% of total shares on issue.

However, Crown revealed in its FY21 results release on Monday that it is no longer in discussions with Oaktree regarding the revised proposal. No further details on how or why discussions had ceased were provided.

With Oaktree off the scene and an earlier takeover proposal by The Blackstone Group already rejected by Crown, any short-term prospects of M&A action appear over.

Star, which had proposed a merger between Australias two largest casino, operators, withdrew its offer in late July amid growing concerns that Victorias Royal Commission could find Crown unsuitable to retain its Melbourne casino license.

Issues raised at Victorias Royal Commission into Crown Melbourne have the potential to materially impact the value of Crown, including whether it retains the license to operate its Melbourne casino or the conditions under which its license is retained, Star said at the time.

Star CEO Matt Bekier said last week that the company may revisit a merger pending the outcome of the Victorian Royal Commission and another related to Crown Perth currently taking place in Western Australia.