Australian casino company The Star Entertainment Group has revealed its decision to take part in the competition for the local gambling giant Crown Resorts by making an official merger proposal worth AU$12 billion. A potential deal between the two entities would create a gambling and hospitality behemoth operating seven properties in four Australian states.
The merger proposal is expected to be announced to the public through an ASX statement later today. It puts The Star Entertainment against Blackstone, the US private investment company that has already revealed it was interested in the acquisition of the struggling casino group. Crown Resorts had its Sydney casino’s operating licence suspended by gambling regulatory bodies in February, while the Royal Commissions that had been established in the states of Western Australia and Victoria will start operation today and next week, respectively.
In March, the US private equity firm Blackstone made an AU$8-billion acquisition bid for Crown Resorts. Later, it raised its offer, while in April another interested party, the US investment fund Oaktree Capital, made an AU$3-billion takeover offer for the 37% stake held by the Australian casino giant’s biggest investor, James Packer.
According to sources close with knowledge of the matter who asked for anonymity because the issue is still confidential, yesterday, The Star Entertainment Group informed Crown Resorts that it would make its non-binding, indicative merger bid public on Monday morning.
Existing Casino Properties Would Keep Their Branding under Proposed Merger Deal
In case the merger offer of The Star Entertainment succeeds, investors in both companies would receive shares in the new combined entity that is set to remain listed on the Australian Securities Exchange under the terms of the deal.
Under the terms of the proposed merger, the combined entity would retain the Crown brand for the already existing properties of the company in Sydney, Melbourne and Perth. The existing casinos and hotels operated by The Star Entertainment Group would keep their branding, too.
A possible merger would probably have to receive the Australian Competition and Consumer Commission’s approval. The Star Entertainment Group would also have to get approval to hold an operating licence by the gambling watchdogs in the states of Victoria and Western Australia.
As the Sydney Morning Herald revealed, The Star Entertainment Group believes that it would be able to solve the regulatory hurdles that are being faced by Crown Resorts thanks to its long-standing experience with casino operation in Brisbane, Sydney and the Gold Coast. Following the evidence gathered by NSW Commissioner Bergin and her damning report, Crown Resorts was found unsuitable to hold the operating licence for its new Barangaroo casino in Sydney back in February.
According to The Star Entertainment, a possible merger with the Australian casino giant would deliver costs savings between AU$150 million and AU$200 million on an annual basis, which would provide an equity value of about AU$2 billion for the combined company’s shareholders. The sources close to the bid said that the merger offer’s implied value is AU$14 a share.
On the other hand, the original offer of Blackstone was estimated at AU$11.85 per share. As revealed by an unnamed source with knowledge of the matter, the company, which already holds a 10% stake in Crown Resorts, got in contact with the Australian gambling giant over the weekend, making a higher offer.
- Author
Olivia Cole
