Austrac casino probe risks derailing Star-Crown merger

Independent federal MP Andrew Wilkie and former Victorian premier Jeff Kennett are opposing Star Entertainment’s bid to merge with Crown Resorts.

Star’s proposed merger with Crown has attracted some high profile opposition. Picture: NCA NewsWire/Flavio Brancaleone

An investigation into money laundering and terrorism financing across all Australia casinos risks derailing Star Entertainment’s ambitious plan to become the “BHP of gaming”.

Star’s proposed merger with Crown has attracted opposition from influential independent federal MP Andrew Wilkie to former Victorian premier Jeff Kennett, whose government oversaw the opening of Crown’s flagship Melbourne casino.

Both Mr Wilkie and Mr Kennett object to one company effectively controlling Australia’s casino market, with a merged Star/Crown operating all casinos on Australian’s east coast and at Burswood in Perth.

But Mr Wilkie said Star’s proposed merger of Crown was also premature, given Austrac has begun investigating the company for potential breaches of the Anti-Money Laundering and Counter Terrorism Financing Act, which carries maximum penalties of $22m per breach.

“There’s no way we should be contemplating a merger at this time if the current operations are found to be operating unethically and legally,” Mr Wilkie said.

“If the breaches are found to be substantiated, then the discussion shouldn’t be about mergers. The discussion should be about whether or not the current casino operators are fit and proper to continue operating casinos.”

The investigation has already prompted an admission from Crown that it illegally transferred more than $160m from international guests from their Melbourne Crown Towers Hotel cards for use on gaming.

Meanwhile, Star revealed Austrac identified potential noncompliance, regarding ongoing customer due diligence and adopting and maintaining an anti-money laundering, counter terrorism financing program in September 2019.

Star has proposed to merge with Crown using a mix of scrip and cash, worth $11.28 to $11.59, depending on the balance between these elements. And it was only last Friday that it was talking about the benefits of such a partnership, with chairman John O’Neill saying it could result in annual savings of up to $200m, providing “clout and scale” as the casino sector recovers from the Covid-19 pandemic.

But Mr Kennett was not convinced and cautioned against such a merger proceeding.

“I‘ve always been against the Star/Crown merger because it’s like a David and Goliath situation,” he said.

“And I am very worried about Star saying they are going to save $200m a year if the transaction goes through. Given the Crown facility here in Melbourne is the largest employer that is obviously going to impact very heavily on our staff down here.

“It is still my view that I would prefer Crown to be owned by a competitor to Star, rather than have one fundamental monopoly in Australia, owning all of the casinos. I think that is almost dangerous.”

Last month, Crown rebuffed a takeover offer from US private equity group Blackstone, which already owns 10 per cent of the company. The James Packer-backed casino group said Blackstone’s offer of $12.35 a share – increased from an initial bid of $11.85 per share – “undervalued” Crown, which has seen its earnings more than halve during the Covid-19 pandemic.

Meanwhile, it has left the door ajar for Star.

The Australian Competition & Consumer Commission, in allowing mergers to proceed, looks at the effect of competition in a particular market, rather than the character of the parties, including potential criminality or civil proceedings.

This leaves a decision on allowing a merger to proceed to individual states, which regulate the casinos in their jurisdictions and oversee their licence.

But Mr Wilkie said he did not have much confidence in the regulators, given he first raised concerns of money laundering at Crown in October 2017.

“And here we are four years later and we finally hear Austrac is paying some attention to it.

“So I have a very low opinion of Austrac, which is another reason why we don’t need to have a casino giant owning at least five casinos.”

Originally published as Austrac casino probe risks derailing Star-Crown merger