GGRAsia – Star Ent withdraws merger offer put to Crown Resorts

Star Ent withdraws merger offer put to Crown Resorts

Jul 23, 2021 Newsdesk Latest News, Top of the deck, World

Australian casino operator Star Entertainment Group Ltd said in a Friday filing it had withdrawn an offer to merge with under-scrutiny market rival Crown Resorts Ltd.

The deal, proposed in early May, valued Crown Resorts’ shares at more than AUD14.00 (US$10.31) apiece, Star Entertainment’s announcement said at that time.

Crown Resorts’ shares closed at AUD10.250 each at the end of Thursday trading, according to the Australian Securities Exchange, where both firms are listed.

“We continue to believe substantial benefits could be unlocked by a merger,” stated Star Entertainment on Friday.

But it added the “uncertainty surrounding Crown [Resorts] is such that The Star [Entertainment Group] is unable to continue at the present time with its proposal in the form as announced on 10 May 2021.”

Crown Resorts is currently the subject of public inquiries in the states of Victoria and Western Australia into its business practices at its Crown Melbourne and Crown Perth casino resorts respectively.

In February, Crown Resorts was found by a regulatory probe in New South Wales, as unsuitable to operate a casino at the firm’s new Crown Sydney property in Barangaroo, Sydney.

“To date, The Star [Entertainment Group] has had limited engagement with Crown [Resorts] on its proposal,” said the suitor in its Friday announcement.

“Also, issues raised at Victoria’s Royal Commission into Crown Melbourne have the potential to materially impact the value of Crown, including whether it retains the licence to operate its Melbourne casino or the conditions under which its licence is retained,” further noted Star Entertainment.

The suitor firm said its proposal outlined “significant strategic and value-accretion benefits” for the shareholders of both companies, including “estimated cost synergies of between AUD150 million to AUD200 million per annum and the potential to create significant value from a sale and leaseback (or similar structure) of the enlarged property portfolio.”

Star Entertainment was still “open to exploring potential value-enhancing opportunities with Crown [Resorts],” said Friday’s filing.

The suitor added it would “continue to closely monitor the Victorian Royal Commission and Perth Casino Royal Commission, with final findings expected later this year”.

Blackstone, Oaktree proposals

Crown Resorts said in a May 17 filing that its board had decided unanimously that a bid from the Blackstone Group Inc to acquire all the shares in Crown Resorts at an indicative offer price of AUD12.35 cash per share, “undervalues Crown and is not in the best interests of Crown’s shareholders”.

In a June 15 filing, Crown Resorts said its board had “not yet formed a view on the merits” of an offer of circa AUD3-billion in funding, from Oaktree Capital Management LP – an investor in the Studio City casino resort in Macau, run by Crown Resorts’ former partner, Melco Resorts and Entertainment Ltd.

Under the Oaktree proposal, the proceeds were to be used by Crown Resorts to buy back some or all of the latter’s shares that are held by Consolidated Press Holdings Pty Ltd, a private firm linked to long-standing Crown Resorts investor James Packer.

Star Entertainment has recently faced regulatory headwinds of its own in Australia.

Star Entertainment said in a June 7 filing that the country’s financial watchdog AUSTRAC – the Australian Transaction Reports and Analysis Centre – identified the possibility of “serious non-compliance” with anti-money laundering and countering of terrorism financing rules at the group’s The Star Sydney property.

The concerns related to the property’s “management of customers identified as high risk and politically exposed persons,” during the periods July 1, 2015 to June 30, 2016; and July 1, 2018 to June 30, 2019.