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Star Entertainment Proposes $12bn Merger with Crown Resorts

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  • Post published:May 9, 2021
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Article originally published on Gold Coast Bulletin

Crown Resorts and Star Entertainment Group would combine to form a near $12bn casino resorts giant under a merger proposal put by Star to the James Packer-backed Crown.

In a statement released on Monday, Crown Resorts said it had received an indicative proposal from Star to merge by way of a scheme of arrangement comprising of a share exchange or alternative cash offer.

The Star’s chairman, John O’Neill, said bringing together The Star and Crown would create an estimated $12 billion ASX-listed national tourism and entertainment leader.

“A merger of The Star and Crown would result in significant scale and diversification and unlock an estimated $2 billion in net value from synergies.

“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.”

It comes as US private equity giant Blackstone boosted its $8 billion takeover proposal for Crown Resorts in a bid to end the seven week stalemate over its initial approach for the company.

The Star Casino in Sydney.
The Star Casino in Sydney.

Star’s share exchange option would see each Crown Resorts shareholder receive 2.68 Star shares for each Crown share.

Crown Resorts said the ratio reflects the ratio implied by the three-month volume-weighted average share exchange ratio to 19 March 2021, the last trading day prior to the announcement of the original Blackstone acquisition proposal of $11.85 per share.

Star shares last traded at $3.91 while Crown shares last traded at $12.12 per share.

The cash alternative offers Crown shareholders $12.50 per unit, subject to a cap

equal to 25 per cent of Crown’s total shares on issue.

If the cash alternative is adopted, the ownership of the merged entity would be comprised 59 per cent of Crown shareholders and 41 per cent for Star shareholders.

Crown said if the merger goes ahead the new board would “initially comprise the current directors of each of Crown and Star.”

The offer is subject to conditions such as Crown and Star shareholder approval, as well as approval of the ACCC and State casino regulators.

An agreement would also have to be reached with James Packer’s holding company Consolidated Press Holdings and the relevant gaming authorities if his shareholding post-merger remains above 10 per cent.

Crown Resorts also said on Monday that Lendlease CEO and managing director Steve McCann will become new CEO of Crown Resorts from June 1, subject to regulatory approvals.

Lendlease CEO Steve McCann will take over as boss of Crown Resorts. Picture: Britta Campion
Lendlease CEO Steve McCann will take over as boss of Crown Resorts. Picture: Britta Campion

US private equity giant Blackstone was today expected to confirm it had boosted its $8 billion takeover proposal for Crown Resorts.

The private equity group is now offering $12.35 per cent cash, an increase of 4 per cent on the prior bid.

The suitor is stepping up its efforts to win control of the company and is upping its bid even while the target company remains mired in regulatory uncertainty, with two state royal commissions, in Victoria and Western Australia, investigating Crown.

In a letter sent to Crown chair Helen Coonan over the weekend, Blackstone lifted its cash bid from $11.85 per share for the company into the $12 range, sources said.

But investors have suggested even more may be required to seal a takeover. At Friday’s close of $12.12, Crown was valued at $8.2bn.

Much will also depend on the stance taken Mr Packer, who controls 37 per cent of the company, but is not party to negotiations between Blackstone and the Coonan-led Crown board.

Mr Packer has previously indicated he is open to the sale and has retained Moelis Australia as an adviser.

Key to Crown’s future - James Packer. Picture: Aaron Francis
Key to Crown’s future – James Packer. Picture: Aaron Francis

Blackstone is keen to gain a foothold in the market and use its global experience in owning and operating integrated casino and hospitality venues in the US and Europe.

The US private equity group is pitching itself an integrated casino owner rather than planning a quick fire spin off of the $4bn property empire that Crown controls, signalling its long term ambitions in the market.

The private equity group is making the price sweetener after last month revising the terms of its $8bn buyout offer by effectively taking on risks associated with the outcomes of two royal commissions and the NSW review.

This would put it on track to complete the deal by the third quarter of this year while sanctions from the inquiries may take until next year to be applied.

A royal commission into Crown’s suitability to operate its Melbourne casino was launched in Victoria in March, with hearings to resume next week.

The suitor is believed to have improved the price of its existing non-binding offer in the letter sent to Ms Coonan.

Blackstone also improved its offer by dropping several conditions associated with the bid.

The private equity major has been frustrated by the continued refusal of the Crown board to engage on its approach. It is believed that it sent a new offer to Crown over the weekend with an improved price with other conditions left unchanged.

Some Crown investors are yet to be enticed by the offer for the beaten down company and told The Australian that they are expecting at least $13 per share.

They also expressed doubts that Blackstone would be able to execute a takeover prior to the findings of the two state royal commissions being resolved and objected to the suitor gaining control at the company’s discounted level.