Star’s Queen’s Wharf sale at risk as HK partners Chow Tai Fook Enterprises, Far East Consortium threaten exit

The embattled gaming group’s deal to sell its Queen’s Wharf precinct to its Hong Kong JV partners is at risk of falling over, throwing into further doubt the company’s future.

Queen's Wharf precinct in Brisbane.

Star Entertainment’s future is once again in doubt, putting thousands of jobs at risk, after the threatened collapse of a deal to raise much-needed cash by selling its Queen’s Wharf precinct to its Hong Kong joint venture partners.

Star said it had received notice from Chow Tai Fook Enterprises and Far East Consortium International to terminate the deal that had been touted as a crucial part of the cash-strapped casino operator’s plan to avoid liquidation.

The termination will come into effect in a week unless Star can revive the agreement and get it back on track. The termination notice comes less than a week after shareholders approved a $300m buyout deal from US casino operator Bally’s Corp and pubs billionaire Bruce Mathieson, a last-minute package that saved the group from almost certain collapse.

The decision by the Hong Kong venture partners to potentially walk away from the $53m transaction could spark further speculation about Star’s ability to continue as a going concern. 

Under the agreement signed in March, Star was to exit its 50 per cent equity stake in Queen’s Wharf and consolidate its position at its Gold Coast and Sydney properties.

Chow Tai Fook and Far East Consortium, which currently each hold 25 per cent of Queen’s Wharf, would have emerged from the deal with 100 per cent ownership of the integrated casino project in Brisbane.

Far East Consortium joint managing director Wendy Chiu told shareholders last week that the company was prepared to walk away from the deal if the numbers did not add up.

“There are some different interpretations between Star and Chow Tai Fook and FEC,” Ms Chiu told an investor briefing in Hong Kong. “Honestly, the commercial terms have to add up, especially given this environment. It hasn’t been finalized, and there are some risks, so we are taking our time, and if it doesn’t work, we’ll go back to our original (stake of 25 per cent.).”

Star said it “remains willing” to continue negotiations with the partners to give effect to the transaction, but if that was unsuccessful the termination will take effect on July 7.

It is understood that talks to formalise the deal had been extended, but fell over when the Hong Kong partners sought significant changes to the original terms.

The notice to terminate could be a “negotiating tactic” to get more attractive terms, according to some people with knowledge of the situation.

“The Star will provide an update when there are further material developments with respect to its negotiations with its joint venture partners, including if any termination of the [deal] takes effect,” Star told the ASX.

Star chair Anne Ward.

The exit of the Hong Kong investors could provide an opportunity for Bally’s Corp chair Soo Kim to consolidate his control of Star.

Mr Kim said earlier this year that he would prefer to retain control of Queen’s Wharf, despite the previously signed deal to offload the brand-new property to the partners. Star shares fell, erasing earlier gains on Monday.

Star chair Anne Ward said on Monday that negotiations between Star and the Hong Kong partners had continued in the past week with a view to finalising documentation but “as of this morning, (we) have not reached an agreement on the outstanding commercial issues.”

Ms Ward told a shareholders meeting held to approve the Bally’s deal last week that the company had “exhausted all options” to secure funding for its survival and the deal from the US company was the only offer on the table.

More than 99 per cent of shareholders who voted at the meeting approved the deal after being told they would get “zero or close to zero” if the company entered voluntary administration and was liquidated. Star’s board came under fire at the meeting for allowing the company’s finances to deteriorate and not considering other alternatives to Bally’s deal.

The deal to sell Queen’s Wharf would have allowed the company to get up to $1bn of debt off its bottom line and raise much needed cash to keep some operations going.

Star has faced a series of regulatory and court actions related to its lax anti-money laundering controls and poor corporate governance that has meant its casino licences in both Queensland and NSW are under the control of a government-appointed manager.

The Queen’s Wharf precinct, which includes a casino, hotel and mixed retail area, continues to bleed red ink after massive cost-over runs and delays in its opening last year.

In a statement to the Hong Kong Stock Exchange confirming the notice to terminate the deal, Far East Consortium said Star would be required to repay to the partners a total of $10m if the deal was cancelled.

Originally published as Star’s Queen’s Wharf sale at risk as HK partners Chow Tai Fook Enterprises, Far East Consortium threaten exit