Australia’s Star Entertainment pulls $6.6 billion bid for Crown Resorts

FAN Editor
FILE PHOTO: The logo of Australia's casino operator Crown Resorts adorns a fence surrounding the Crown Perth hotel and casino complex in Western Australia
FILE PHOTO: The logo of Australia’s casino operator Crown Resorts adorns a fence surrounding the Crown Perth hotel and casino complex in Western Australia, October 20, 2016. REUTERS/Aaron Bunch

July 23, 2021

By Byron Kaye and Nikhil Nainan

(Reuters) -Australian casino operator Star Entertainment Group on Friday withdrew a A$9 billion ($6.6 billion) buyout proposal for rival Crown Resorts Ltd after an inquiry heard the target should lose its main licence, sending its shares lower.

Star, the country’s No. 2 casino operator, said it may yet consider a tie-up with the troubled larger company, but was concerned about the impact of an inquiry on its value “including whether it retains the licence to operate its Melbourne casino or the conditions under which its licence is retained.”

The decision removes a lifeline for Crown which has been trying to convince regulators it can rebuild its culture after an earlier inquiry in February found it allowed money laundering on its premises for years and declared the company unfit to open a just-built casino in Sydney.

That inquiry, along with venue closures due to COVID-19 lockdowns around the country, had put downward pressure on Crown’s shares, sparking at least two takeover approaches for the company in which billionaire James Packer has a 37% stake.

A subsequent inquiry was told this week Crown should also be stripped of its gambling licence for the Melbourne resort, whose casino generates about three quarters of its profit, due to insufficient efforts to reform its culture.

Crown shares fell up to 4% in early trading on Friday, against a broader market decline of 0.25%, taking its value to levels before the merger and acquisition approaches began in March.

“The withdrawal of (Star’s) proposal is unlikely to come as a surprise given the risk the Victorian Royal Commission Inquiry poses,” said Goldman Sachs analysts in a research note, which added that Star may ultimately benefit by restrictions placed on its rival.

Star shares were up about 1%.

Crown said in a statement it remains willing to engage with Star, and will continue to consider any proposal it receives.

Crown rejected a lower-priced proposal from buyout giant Blackstone Group in May, leaving Star’s approach as its main option to show regulators it could overhaul itself under new ownership.

Crown does have another option on the table, with Oaktree Capital Group submitting a proposal in April to bankroll a A$3 billion buyback of Packer’s stake, which removes a regulatory concern.

($1 = 1.3548 Australian dollars)

(Reporting by Nikhil Kurian Nainan in Bengaluru and Byron Kaye in Sydney; Editing by Krishna Chandra Eluri and Richard Pullin)

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