Week Ahead | Crown Takeover News

23 March 2021

Global markets were mixed on Friday (S&P 500 index -0.1%) as Technology shares bounced back with the Nasdaq Composite closing 0.8% higher while the S&P 500 edged lower in the last minutes of trading to close just in the red.

Wall Street wavered as bank stocks fell after the Federal Reserve let a capital break for big banks expire. The decision triggered a spike in 10-year Treasury yields to 1.75% earlier in the day before closing at 1.72%. Fed Chairman Jerome Powell reiterated the central bank will provide aid to the economy “for as long as it takes.

In Europe the market seemed to largely brush off news that more European countries were considering tighter lockdown restrictions amidst a renewed pick-up in Covid-19 cases in the region.  Germany’s Chancellor Merkel said it was likely the country would need to apply the “emergency brake”, re-imposing tighter lockdown rules, rather than easing restrictions in April as previously planned.  Italy imposed a tighter lockdown last weekend while Paris entered a month-long lockdown on Friday night.  The stuttering vaccine rollout in Europe means it will be slower to exit lockdown conditions and its economic recovery will lag countries like the UK and US, which are more advanced in vaccine distribution.

Crown Resorts (CWN:ASX)
Over the weekend media reported Crown received a takeover bid for 100% of the company over the weekend with sources close to the company pointing to private equity group Blackstone, which already has a 10% stake in the company.
Crown has confirmed the offer this morning and has jumped +17% (with the offer price at $11.85 per share) and the board is seeking advice and considering the offer.

The group, includes CWN's casino properties in Melbourne, Perth and Sydney, which have been under intense regulatory scrutiny in recent weeks and James Packer appearing before the NSW inquiry last year. The bid comes just as Crown prepares to go through similar investigations in Victoria and Western Australia. The NSW inquiry, which found Crown was not suitable to run its new Sydney casino, led to considerable change at the group, including the resignation of its chief executive and five directors.

Add to this the obvious challenges to the business stemming from COVID, and it looks like Blackstone can see an opportunity. James Packer, who controls 37% of the company, shapes as the kingmaker.
CWN shares have rebounded since the initial covid-19 sell off and we were on the side-lines with a HOLD rating.

For the sector more generally, things may be about to turn given vaccines and expected signed off on a travel bubble – with speculation that a bubble could open 19th April between New Zealand, Australia, Singapore & Cook Islands.


Australia & New Zealand Market Movers

The Australian market (ASX 200 index -0.6%) closed lower for a third consecutive day on Friday and finished down for the week – its first five-day loss in three weeks. The energy sector led the decline after crude oil prices dived -7% on Thursday on fears of fresh lockdowns in Europe. Woodside Petroleum sank -3.3%, Santos tumbled -2.5%, Beach Energy dropped -2.3% and Oil Search lost -2.1%.

While Crown is the headline, separately, the Australian is reporting 2 other suitors have emerged in the race for Bingo Industries, just days before CPE Capital and Macquarie and Infrastructure and Real Assets are expected to formalise an offer for the company.

The general insurance sector in Australia will likely be under pressure today as insurers brace for hundreds of millions of dollars of payouts after NSW was hit by once-in-a-lifetime floods.
The New Zealand market was a touch higher on Friday (NZX 50 index +0.2%) as the electricity stocks rallied from a recent decline with Mercury and Contact Energy adding +4.8% and +3.5% respectively

The S&P/NZX and FTSE Russell Index funds completed their quarterly rebalance in an extended trading session. Infratil dropped 5.4% to $6.95 in the rebalance, wiping away any share price gain it made from the sale of Tilt, which itself has been trading steadily just below the takeover price at $7.60.

Outside of the top 50 stocks, Ikegps Group climbed 4.3% after it won a long-term contract with an unnamed US national engineering services business worth US$700,000 per year. The utility measurement firm earned $4.4 million of revenue in the first half of 2021, meaning the deal a significant size for the business.


3 Things Markets will be Watching this Week

  1. COVID related new-flow and vaccines remains a key driver for markets
  2. Highlights this week include 4th quarter economic growth (GDP) being released in the US.
  3. Locally, it will be a big week for the retail sector in NZ with Kathmandu, Hallenstein Glasson and Warehouse Group all reporting earnings.


Highlights this week include 4th quarter economic growth (GDP) being released in the US.

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