The Crown Resorts Ltd (ASX: CWN) share price was an exceptionally strong performer on Monday.
The casino and resorts operator's shares rocketed 21% higher to $11.97.
Why did the Crown share price rocket higher?
Investors were scrambling to buy Crown shares on Monday after it confirmed the receipt of a takeover offer from US investment giant Blackstone.
According to the announcement, Crown has received an unsolicited, non-binding, and indicative proposal of $11.85 cash per share from Blackstone. This indicative price will reduce by the value of any dividends or distributions Crown declares or pays.
As things stand, the Crown board is assessing the offer and has advised shareholders not to take any action. It also warned them that there's no certainty that the proposal will result in a transaction.
What are analysts saying about the Crown takeover offer?
While it has not given its verdict on whether it believes a deal will be reached, Goldman Sachs has made a few comments about the Crown takeover offer.
It commented: "We note there remains heightened regulatory overhang on CWN […] and there are multiple conditions around this offer, including approval still from Blackstone's investment committees, as well as regulatory conditions approving Blackstone as a 'suitable person' to hold CWN's licenses and other gaming-related approvals. We also note the Victorian government's inquiry into Crown is expected to commence this week (Wednesday)."
Is the offer good value for shareholders?
Goldman Sachs appears undecided on whether the Crown takeover offer represents good value.
It notes that offer isn't at a meaningful premium to the average multiples it has traded at previously. However, it also concedes that Crown's earnings composition has changed in recent years.
It explained: "The proposed A$11.85 per share offer equates to 12.9x EV/EBITDA on our FY22E EBITDA (including ~A$750 mn of debt), or on more normalised earnings of 11.6/11.1x FY19A/FY23E, respectively. For context, CWN's long run historical 12-mo forward trading average has been ~12x, whilst its 3/5 year averages have been ~11x. However, we note CWN's change in earnings composition over the years, noting that volatile, lower-multiple VIP revenues, as a percentage of group amounted to close to ~30% back in FY15/16, falling to ~20% by FY19, and we expect this to represent only ~10% of group revenues on our FY22 estimates."
All eyes will be on the Crown board in the coming days or weeks when it reveals whether it feels it is good value or not.
