Cosmopolitan Sold For $1.78B to Blackstone
Apparently, the right amount of wrong does have a price tag. Deutsche Bank has sold The Cosmopolitan of Las Vegas to Blackstone private equity group for $1.73B in cash.
Blackstone Group is one of the largest private equity firms. In addition to holding a chunk of Caesars Entertainment (along with Apollo Global Management and Texas Pacific Group) Blackstone has worked in the casino sector as a turnaround advisor for Station Casinos, Kerzner International, The Mashantucket Pequot Tribe (Foxwoods) and Mohegan Tribal Gaming Authority (Mohegan Sun). They've also helped pull Ford Motor Company out a financial ditch, scrubbed Dow Corning Corp.'s books, refilled Xerox Corp. toner and held Enron's hand as it went through bankruptcy.
Experts pegged the value of Cosmopolitan at $700m-$1b at best, with DB's $2b asking price considered to be outrageous. Did Blackstone overpay?
It is hard to tell if this is a standard turnaround play or if Blackstone is going to give a go at creating a gaming platform, in which case they'll have to buy some other stuff to make it happen. Another outside possibility (debunked, see below*) is that Blackstone is angling for Cosmopolitan to be absorbed into their Caesars holdings via 'strategic partnership.' Good luck getting past regulators. Another possibility is Blackstone did the dirty work on behalf of a shadow entity (Tribal gaming?) to be named later.
Wall Street Journal reports that other bidders were Crown Resorts LTD (headed by James Packer) and a venture formed by the holy trinity of TPG Capital, Apollo Global Management and Caesars Entertainment.
The sale of Cosmopolitan to Blackstone still doesn't remedy their biggest problem - lack of player development marketing ecosystem. They're treading water in a sea of optimization and cost cutting until someone throws them a rolodex.... unless Blackstone rolls Cosmopolitan into Hilton somehow.
As part of his Employment Agreement Cosmopolitan CEO John Unwin was to be awarded a $4,500,000 retention bonus should the property be sold within 4 years of opening. Drinks on Unwin!
Blackstone recently completed a major investment in Crocs footwear, does this spell doom for Cosmo's CRSVR shop. They also own Duncan Hines, Van De Kamp's, Mrs. Paul's, Mrs. Butterworth AND Aunt Jemima!!!
Here's Blackstone Private Equity exec Joe Baratta explaining the company philosophy:
More on this as it develops... here's the story from The New York Times.
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