Switkowski passes regulatory hurdles to become Crown chairman

Ziggy Switkowski has officially taken the reins of Crown Resorts after receiving state-based regulatory approvals.

The Australian Financial Review reports that the former telco executive and RMIT chancellor replaces interim chairman Jane Halton, who is the only remaining Crown board member to survive the tumult of the past two years and will remain on as an independent non-executive director.

Switkowski being appointment comes as Crown weighs Blackstone’s third takeover offer this year, four week after a bruising report from the Victorian royal commission, led by Raymond Finkelstein QC, stopped just short of cancelling Crown Melbourne’s casino licence.

“The Board and I are working closely with the CEO, Steven McCann and his executive team to address the findings of the various inquiries and deliver value to our shareholders,” Dr Switkowski said.

Mr Finkelstein “somewhat reluctantly” decided against recommending Crown be stripped of its licence despite unearthing “disgraceful” and “callous” behaviour, including allowing irresponsible gambling to flourish and facilitating money laundering by cashed-up VIPs, some linked to organised crime.

Crown awaits outcome of WA royal commission

Instead, Crown must live with close regulatory scrutiny, including two years of surveillance by a government appointed manager who can veto board decisions.

Crown is still facing a live royal commission in Western Australia into its Perth licence, due to report in March, and is working towards opening its Sydney casino after a NSW inquiry found in January it was unfit to run a casino.

Steve McCann, Crown’s new chief executive officer, said in November that the board is considering Blackstone’s $12.50 cash per share offer for the James Packer-backed casino operator, which is 15 cents per share higher than the previous Blackstone bid rejected in May.

“We have a strong recovery plan, we are overhauling our culture and are on a pathway towards industry best practice governance and compliance,” Mr McCann said.

“There is no question these reforms represent fundamental changes that have strengthened and enhanced the value of our business.”

Crown’s shares jumped more than 16 per cent on the news.

But Crown has not offered due diligence to Blackstone, which already owns 10 per cent of Crown and is its second-biggest shareholder and some analysts query if regulators will sign off on new ownership while the special manager is overseeing the company.

Others say Crown could eke out more cash from the private equity giant.

Analysts have their say on Crown value in current environment

JPMorgan analyst Don Carducci told investors in late November that the government appointed “special manager” may dampen state-based regulator’s appetite to approve an ownership change.

“Crown has rejected bids previously due to timing and price and we reiterate the additional level of decision-making required for approval,” he said in a note to clients.

“Crown and or the special manager is likely to reject this bid for various and differing reasons…including valuation, regulatory, or otherwise.”

While Credit Suisse analysts told investors Blackstone could pay up to $15 per share in its takeover bid, split up the casinos in Sydney, Melbourne and Perth from its property assets and generate returns commensurate with its existing real estate investment vehicle.

“But we think the likelihood is that the separation of Crown’s assets into different streams is unlikely to be permitted…in this regulatory environment,” Larry Gandler and Bradley Beckett wrote in a note to investors.

“Assuming Blackstone shares that view, it is more likely it will hug the lower end of the valuation range in making proposals to Crown.”

Ultimately, they expect “Crown’s board will negotiate an agreed deal with Blackstone.”