The Star Entertainment Group has withdrawn its offer to merge with Crown Resorts

The Star Entertainment Group has pulled the pin on $12bn plans to merge its operations with beleaguered Crown Resorts. HERE’S WHY>>

The Star Gold Coast Masterplan Development (viewed from the South) at its island site at Broadbeach where two existing towers will be joined by Tower 1 starting construction in August and a proposed further four towers

• AUSTRAC TO PROBE THE STAR
• STAR “OUT OF VIP JUNKET BUSINESS”

THE Star Entertainment Group has pulled the pin on $12bn plans to merge its operations with beleaguered Crown Resorts, saying uncertainty over Royal Commission findings meant they were unable to proceed.

Shares in Crown have been sliding since the closing submissions of the Royal Commission, in which Adrian Finanzio SC delivered a blistering argument which cast doubt on the operator’s suitability to hold a licence in Victoria.

In an announcement to the ASX Friday, The Star said it had “withdrawn its conditional, non-binding, indicative proposal announced on 10 May 2021 to merge our businesses”.

The Star said while it continued to see “significant strategic and value” benefits and cost savings of up to $150m-$200m, the proposal had failed to gain any traction with Crown.

“To date, The Star has had limited engagement with Crown on its Proposal,” the announcement said.

“Also, issues raised at Victoria’s Royal Commission into Crown Melbourne have the potential to materially impact the value of Crown, including whether it retains the licence to operate its Melbourne casino or the conditions under which its licence is retained.

“We continue to believe substantial benefits could be unlocked by a merger, however the uncertainty surrounding Crown is such that The Star is unable to continue at the present time with its Proposal in the form as announced on 10 May 2021.

“The Star remains open to exploring potential value enhancing opportunities with Crown. The Star will continue to closely monitor the Victorian Royal Commission and Perth Casino Royal Commission, with final findings expected later this year.”

The Star Gold Coast Masterplan Development (viewed from the West) in Broadbeach. Star has bold plans for five new towers on the site which is already home to the original Star complex and Darling suite hotel. Tower 1 starts construction in August with four proposed to come after that over the next decade.

The Star had touted the proposal as a game changer for the sector, saying a merged company would become the “BHP of hospitality and gaming”, enabling the Gold Coast to tap into an expanded marketplace including capital cities Melbourne and Perth.

Star Entertainment Group CEO Matt Bekier said Star’s indicative proposal would create a company “bigger than Qantas” with 30,000 staff if approved.

The merger had been opposed by independent federal MP Andrew Wilkie and former Victorian premier Jeff Kennett, who objected 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.

Austrac has began an investigation into Star for potential breaches of the Anti-Money Laundering and Counter Terrorism Financing Act, which carries maximum penalties of $22m per breach.

Star’s chairman declared in February the company was “out of the junket business until further notice” as casino regulators digest a blistering report into corruption and organised crime at Crown Resorts casinos.

While acknowledging there would be “obvious ramifications” for the industry, John O’Neill stopped short in February of saying Star’s partnership with disgraced VIP high-roller operator Suncity was permanently over or simply on Covid-induced hiatus.

The Star will report its financial results for FY2021 on August 19.

Follow @Kathleenskene