If there is one thing that clearly highlights just how lucky James Packer was in timing his exit from Crown Resorts, it’s the current market value of the business.
Two-and-a-half years ago, US private equity giant Blackstone bought Crown for $9 billion. Of that $9 billion, Packer pocketed $3.3 billion for his stake in a sliding-door moment after which he has built on that fortune with a series of US investments, most notably in this year’s hottest stock, Nvidia.
While Packer’s fortunes have flourished, Crown (under Blackstone’s ownership) is now worth less than $300 million.
James Packer exited Crown Resorts with a $3 billion payout in 2022.Credit: Fairfax Media
In what could go down as one of the worst acquisitions in recent history, Blackstone bid against itself in 2022 in a desperate attempt to win over Crown shareholders and in particular its largest, Packer. It’s an eerie echo of the $1 billion sale of the Nine Network to Alan Bond orchestrated by James’ father, Kerry. That deal prompted Kerry to proclaim “you only get one Alan Bond in your lifetime and I’ve had mine”.
For his part, James Packer played his cards well with Crown. He had been hawking around his stake in Crown for a year or more before Blackstone came knocking. The big motivator for Packer was an understanding that the heady days of Crown using junkets to lure in big spending Asian punters to the casinos were soon to be a thing of the past.
It was often said that James Packer’s exit out of the media business was his moment of investment glory. His exit from the casino industry in Australia was one better.
Packer’s decision was made as Crown’s earnings were heading for a cliff, and we are now getting an inkling of just how steep a cliff it is. According to The Australian Financial Review, investment bank Jeffries has pegged Crown’s earnings before tax, depreciation and amortisation for fiscal 2024 at $24 million.
That figure is closer to $75 million when one-off costs are stripped out, but it is still nowhere near the market expectations Blackstone had of pocketing close to $700 million in annual earnings when it bought Crown.
While Packer was astute enough to get out before the Australian casino sector imploded, he probably hadn’t anticipated the extent to which things were going to turn for Crown and the casino sector.