Star Entertainment rescued from brink of collapse after signing $300m deal with Bally’s
Troubled casino operator Star Entertainment has accepted a $300m takeover offer from US-based Bally’s Corp, helping it narrowly avoid administration.
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Troubled casino operator Star Entertainment Group has accepted a $300m buyout offer from US-based Bally’s Corp, saving it from the brink of financial collapse.
Under the deal announced on Monday night, Bally’s will issue convertible notes at a conversion price of 8 cents per share that will result in it obtaining a 56.7 per cent stake in Star. Star is expected to receive the first $100m as early as Wednesday as part of the rescue package with the remaining $200m to be paid following a shareholder vote.
The deal will also see pubs billionaire Bruce Mathieson, Star’s biggest single shareholder, potentially investing an additional $100m in the company if required. If this occurs, the investment from Bally’s would reduce to $200m.
Star’s board said it intended to unanimously recommend that shareholders vote in favour of
the buyout in the absence of a superior proposal and subject to an independent expert concluding that it is in their best interests.
Star’s previously announced deal to sell its half stake in the debt-laden Queen’s Wharf integrated resort in Brisbane to its Hong Kong joint venture partners Chow Tai Fook and Far East Consortium will proceed.
Star’s board ran through options at a meeting on Friday, including a possible administration scenario following last week’s collapse of its financing package with Melbourne-based Salter Brothers.
That deal foundered when the NSW Government refused to cede security over Star’s Sydney casino to activate a $750m loan, spooking the few remaining potential financiers Star had been banking on.
Mr Mathieson is likely to emerge as one of the big winners from the deal.
He had earlier backed the Bally’s offer over the Salter Brother’s refinancing and had expressed previous interest in acquiring The Star Gold Coast.
Last week, Mr Mathieson said the refinancing had been a “very hard deal” to put together given the changing regulatory environment and restrictions in the casino sector.
A collapse of the company, which has casinos in Sydney, Brisbane and the Gold Coast, would have been the biggest corporate failure since Virgin Australia in 2020 and have serious ramifications for the tourism sector across Queensland and NSW.
Bally’s had initially aimed to secure all of the casino group’s assets in the buyout but it is likely the deal will only include the Gold Coast and Sydney properties.
Bally’s chief executive Robeson Reeves said last week that while the US company was not “troubled” by the deals Star was making to sell its assets “we want to keep everything together, rather than strip it apart”.
“We think that things tend to operate better if they’re one larger organisation where you can actually generate benefits for each of the properties one by one by making one tweak in one place.”
Star shareholders will have the opportunity to vote on the deal at a meeting scheduled for June. The Star is finalising its financial accounts for the period ended December 31 2024 and will lodge them with the ASX “as soon as possible”.
Star has not been able to lodge its half-year report because of its financial strife with trading in its shares suspended since March 3. They last traded at 11c. The company’s total market cap of $315m compares to a peak of $5.15bn reached in 2018.
An administration would have put at risk more than 8000 jobs across Brisbane, the Gold Coast and Sydney as administrators sough to cut costs and line up a fire sale of assets.
Bally’s owns 19 casinos in the US as well as operations in the UK with about 17,700 poker machines, 630 table games and 3950 hotel rooms. Bally’s chairman Soo Kim describes himself as a “corporate fireman” whom companies call when they get into trouble.
Bally’s, which has a reputation as a casino buyer of last resort, is facing financial challenges of its own. Its shares slid 15 per cent in last week’s market rout and it is now capitalised at less than $US550m ($900m).
The increasing risk of a US recession – now being pegged at a 50-50 chance by some economists – adds to the pressure on Bally’s already stretched balance sheet.
Fitch Ratings last month downgraded the company’s default rating to reflect its relatively high leverage along with risks in the development of casino projects in Chicago.
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Originally published as Star Entertainment rescued from brink of collapse after signing $300m deal with Bally’s
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