Star announces Queen’s Wharf exit deal has fallen through, negotiations still ongoing
One of the bigger Australian casino transactions in recent years appears to be all but dead, as Star Entertainment announced on Monday that its previously announced deal to exit the multibillion-dollar Queen’s Wharf development in Brisbane could terminate as early as 7 July.
In early March, Star announced plans to exit the joint venture, of which it owned 50%. The other two partners in the JV, Far East Consortium and Chow Tai Fook Enterprises, bought out Star’s stake in the project for AU$53 million. Despite the long-term potential upside of the venture, which just opened last August, Star’s perilous financial situation necessitated the exit.
Key for Star was the ability to divest the monetary commitments related to the development, which were said to be hundreds of millions of dollars worth of equity and debt contributions. As part of the agreement, the two partners also relinquished their stakes in another venture, Star Gold Coast, back to Star. Thus, Star effectively divested one casino and consolidated full ownership of another.
However, that transaction is now reportedly in question. The original terms of the deal had set a 30 April deadline for certain long-form documentation, which was not met. This fact was not announced independently, but was tucked in the company’s general meeting notice from late May. With the deadline having lapsed, Star said that all three parties then had the option of exiting the deal. Despite ongoing negotiations in the interim, it appears that the two partners have thrown in the towel.
“This morning, The Star received from the Joint Venture Partners a notice to terminate the HoA which will become effective five business days from today, unless withdrawn earlier (i.e. any termination of the HoA would take effect on Monday 7 July 2025),” the company said in an ASX filing.
Not over yet?
Importantly, the operator said that despite receiving the notice, “The Star remains willing to continue negotiations with the Joint Venture Partners to give effect to the DBC transaction.” Given Star’s ongoing struggles, the ability to exit the project’s financial commitments would still be favourable.
But Far East Consortium, for its part, was not as optimistic. Its statement on the matter contained no such language and merely plotted out next steps. Once the deal is terminated, FEC said, all parties must be restored as best as possible to how they were prior to its announcement.
“Among other things, The Star is required to repay to the JV Partners (in equal shares) a total of AU$10 million (equivalent to approximately HK$51.3 million) by no later than 30 days of the date of termination,” the statement said, adding that the partners are also “no longer required” to make a separate AU$8 million payment to Star.
If the payment is not made within the time frame, Star will relinquish its stake in one of the Star Gold Coast hotel towers as collateral.
Chow Tai Fook had not publicly commented on the deal as of writing.
Blessing and a curse
The potential dissolution of the Queen’s Wharf agreement represents a significant fork in the road for Star. What made the deal interesting, apart from Star’s willingness to walk away from such a new venture, was its timing. As things were unfolding, Star was also in buyout talks with US-based operator Bally’s Corp. The Brisbane exit was ultimately announced 7 March, with Bally’s extending an offer just two days later.
In the weeks following, Bally’s made it clear that it did not support that deal, as it wished to keep all of Star’s assets intact. Despite this, Bally’s and Investment Holdings still agreed to secure majority ownership of Star in a combined AU$300 million deal in early April. After acquiring Star Bally’s Chairman Soo Kim then confirmed to Inside Asian Gaming that the divestment still appeared to be on track to close despite the objection.
On 25 June, Star shareholders voted overwhelmingly in favour of the Bally’s-Investment Holdings takeover. Based on that history, it would seem that Bally’s would be happy for Star to reengage Queen’s Wharf, especially as it attempts to turn its fortunes around.
“We believe that these assets sort of work together,” Kim told IAG in an interview posted on Monday before the Queen’s Wharf news had broken. “Problems that are faced by one are sort of faced by all three [of Star’s casinos]. So we plan to solve those problems and we have a responsibility to manage Brisbane out of the box one way or another. Management is as important than who or how it’s owned.”
AUSTRAC looming
Lurking in the background of this saga is AUSTRAC, Australia’s federal financial crime watchdog. Star has been under investigation by the agency for multiple years and is accused of a host of AML and KYC violations, the extent of which has already been laid bare by several state suitability inquiries.
Star’s casino licences for its Sydney and Gold Coast properties are suspended and both are under state-appointed management. Sydney in particular has been a sore spot, as Star’s flagship property has twice been found unsuitable for licensure. Another suitability review is set to come after 30 September. As a result of the tumult, Star has long been flooding cash, which has been the driving reason for most of its transactions over the last year or so.
The embattled operator entered into court proceedings with AUSTRAC this month. Prosecutors detailed Star’s problematic relationships with junkets and the multitude of AML risks they presented. Chief among them was Suncity Group, the notorious junket whose ringleader Alvin Chau is currently imprisoned in Macau on illegal gambling charges.
AUSTRAC is reportedly seeking penalties of AU$400 million, which would fall in line with the AU$450 million fine paid by fellow operator Crown Resorts in 2023 for similar violations. Star, meanwhile, has cautioned that such a fine would ensure its death. The case is ongoing.
“We contend for a $100 million fine,” Star’s attorney, Steven Finch, SC told regulators, per the AAP. “That amount… is all the money that we have and reasonably anticipate being able to borrow, hoping but not certain that we will be able to survive that.”