Australian casino operator The Star Entertainment Group has made a non-binding proposal to merge with rival Crown Resorts in a move that would create a A$12 billion ASX-listed gaming and entertainment powerhouse.
According to the proposal, The Star offers 2.68 shares per Crown share. This values the latter casino company’s shares above A$14.
Crown shareholders would also be offered an alternative of A$12.50 per share in cash, capped at up to 25% of Crown shares. If that alternative gets fully taken up, a merger between the two companies would result in Crown shareholders owning 59% of the combined group’s shares and Star shareholders holding the rest.
The Star’s proposal eclipses New York-based private equity firm Blackstone’s sweetened offer. The buyout giant over the weekend raised its previous bid to A$12.35 from A$11.85, valuing Crown at around A$8.4 billion.
Both The Star and Blackstone’s proposals are higher than Crown’s share price has been since early 2020. The casino operator saw its price crash as the Covid-19 pandemic swept the globe and shattered many industries, including hospitality, land-based gaming, and entertainment, and as the Bergin inquiry in New South Wales confirmed damning media reports about company links to organized crime and money laundering.
As a result of the inquiry’s findings, Crown was deemed unfit to hold a casino license in NSW and operate a gambling venue at its new luxury resort in Barangaroo on Sydney Harbour.
A Compelling Investment Proposition
In an early Monday filing to the ASX, The Star said that it expects a tie-up with Crown to unlock an estimated A$2 billion in net value from synergies.
The Star currently operates Sydney’s only casino and properties in Queensland’s Gold Coast and Brisbane. It is also currently building a multi-billion integrated resort in the latter city. As for Crown, it runs casinos in Melbourne and Perth as well as the recently opened Crown Sydney resort.
Of their proposal, Star Chairman John O’Neill said Monday that “with a portfolio of world-class properties across four states in Australia’s most attractive and populated catchment areas and tourism hubs, the combined group would be a compelling investment proposition and one of the largest and most attractive integrated resort operators in the Asia-Pacific region.”
The deal is subject to multiple approvals, including clearance from Australia’s competition authority. The Star said it does not believe the Australian Competition and Consumer Commission to oppose the deal. The regulator confirmed that the casino operator has been in touch regarding its merger proposal.
Crown said in a statement that its Board is yet to form a view on the merits of The Star’s offer and that it would commence a process to assess it and would engage with relevant stakeholders including regulatory authorities.
The company further noted that its shareholders do not need to take any action in relation to the offer at this point. It issued a similar statement in relation to Blackstone’s upgraded bid.
Aside from the Bergin inquiry, Crown is also facing royal commissions in Victoria and Western Australia. The Star noted Monday that a merger could heal some of its rival’s regulatory woes and help it finally obtain approval to operate a casino at Crown Sydney.
Source: CROWN RECEIVES MERGER PROPOSAL FROM THE STAR ENTERTAINMENT GROUP, Crown Resorts Newsroom, May 10, 2021
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