M&A

Star Entertainment proposes Aus$12bn merger with Crown, while Blackstone ups bid

| By Robert Fletcher
Australian land-based operator Star Entertainment Group has put forward a new proposal to merge with rival business Crown Resorts and created a combined operation worth approximately Aus$12.00bn (£6.71bn/€7.76bn/US$9.43bn), while private equity giant Blackstone Group has also submitted a revised offer for Crown.
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The non-binding proposal sets out a share exchange ratio of 2.68 Star shares for each Crown share, valuing Crown shares at $14 each. Crown shareholders would also be offered a cash alternative of $12.50 per share, up to a maximum of 25% of Crown’s issued share capital.

The proposal would mean the merged entity would be 59% owned by Crown shareholders with the remaining 41% for Star shareholders.

Star said the merger represents a “compelling value proposition” for all shareholders for the following reasons, adding that the combined operation would create a national tourism and entertainment leader in Australia.

Should the merger go through, the group would be expected to deliver between $150.0m and $200.0m in cost synergies per year, with an estimated net value of $2.0bn. 

Star’s chairman John O’Neill added that the overall operation would be worth around $12.0bn, with combined group pursuing growth opportunities across marketing and events, digital and technology initiatives, investment in online capabilities and optimisation of a combined loyalty program.

“A merger of Star and Crown would result in significant scale and diversification and unlock an estimated $2.0bn in net value from synergies,” O’Neill said. 

“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.”

Star added that it hopes to complete necessary due diligence and agree binding merger and definitive debt financing documentation within the next three months, with plans in place to engage with a range of investors on a potential sale and leaseback of the enlarged property portfolio during diligence. 

The proposal comes as Crown also received a revised takeover proposal from Blackstone Group.

Blackstone in March put forward an offer of $8.02bn to acquire the remaining shares in Crown, having already acquired 9.99% of the business in April 2020 with the purchase of a stake from Melco.

The new proposal of $12.35 in cash per Crown share represents a 4% increase on the previous offer of $11.85 per share submitted in March but is lower than both the $14 valuation and $12.50 cash alternative proposed by Star. 

Other terms of the original offer remain in place, with Blackstone having last month altered its bid so that the deal would not go ahead if either of Crown’s existing licences are suspended or its New South Wales licence were not granted.

An inquiry in New South Wales found Crown was “unsuitable” to operate a casino in the Barangaroo district of Sydney. 

The Crown board will review both the Star proposal and Blackstone revised offer before making further announcements, stating that there is no guarantee either proposal will result in a transaction.

Meanwhile, Crown has also announced the appointment of Steve McCann as its new chief executive and managing director.

Subject to the receipt of certain probity and regulatory approvals, McCann will officially join Crown on 1 June.

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