It took a while, but The Star Entertainment Group has finally decided to step forward and offer a deal to purchase the beleaguered Crown Resorts. The casino and hospitality company has submitted a formal proposal to buy out Crown for $7 billion (AUD$9 billion) in an all-stock deal to compete against existing bids by the Blackstone Group and Oaktree Capital. Should the acquisition be chosen and approved, with Crown and Star holding, respectively, the first and second spots in Australia’s casino industry, the result would be a massive gaming and hospitality company that would control a huge portion of the country’s gaming industry.
The Star on the Crown
Initial reports indicated that The Star might be ready to propose a $9.4-billion (AUD$12 billion) merger. What finally made it to the table was an offer that would see the company provide 2.67 shares for each Crown share, estimating that each of its own shares would be worth $3.93 should the deal move ahead. This would put the deal at right around $7 billion, but the final price would be determined once negotiations became serious.
For that to happen, there’s still a lot of work to be done. Blackstone and Oaktree were already in the hunt for Crown’s assets but, when it became apparent that The Star was going to get involved, realized they would need to enhance their deals. Blackstone increased its $6.2-billion all-cash offer to $6.6 billion and Oaktree, which previously proposed a buyout of Crown founder James Packer’s stake for $2.3 billion, is likely to increase its arrangement, as well.
Blackstone, Oaktree Deals Still Possible
Should The Star proposal be accepted by Crown and gaming regulators, there would still be a chance for Blackstone, Oaktree or both to get involved. It’s likely that the company would explore a sale and leaseback program for some of the properties and, since these other two have the money and the desire to get involved, it would be easy to flip some of the Crown assets soon after closing. The idea of The Star taking control of Crown has found initial favor among investors, with the price of both entities’ stocks trending upward following the announcement.
A change in structure at Crown is inevitable, whether it be through an amenable acquisition or a forced takeover. The company has already been deemed “unsuitable” to be a casino operator in New South Wales (NSW) is still facing investigations in other Australian states. Victoria and Western Australia are now investigating the company and could reach the same conclusion as NSW. Those decisions could come within the next couple of weeks.
The Star is trying to drum up more support for its proposal, with Chairman John O’Neill saying in a statement, “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.”