Star merger with Crown could bring $200m in savings

The proposed merger between Star Entertainment and Crown Resorts could result in annual savings of up to $200 million a year as the casino sector recovers from Covid-19.

The proposed merger between Star Entertainment and Crown Resorts could result in annual savings of up to $200 million, providing “clout and scale” as the casino sector recovers from the COVID-19 pandemic.

Star Entertainment chairman John O’Neill in an interview marking the 10th anniversary of the company’s demerger from Tabcorp said the $12 billion merger deal was “compelling” in terms of its potential to lift profit and shareholder value.

“It really is salivating with the potential to save between $150 million and $200 million a year,” said Mr O’Neill. “It gives you scale and clout in a market that has faced uncertainty and where consolidation opportunities are real.”

He said the company would meet competition laws. “We are not presuming anything and are working very closely with the ACCC to come to a good landing,” said Mr O’Neill.

Mr O’Neill was a driving force behind the creation of Star, then known as Echo Entertainment, as a director of Tabcorp. He said the impetus behind the demerger in 2011 was to allow the casinos in Sydney, Brisbane and the Gold Coast to grow to their full potential.

The Star CEO Matt Bekier pictured on the balcony of The Sovereign Room at The Star casino in Pyrmont with the Crown tower at Barangaroo in the background. The Star has proposed a merger with Crown Group. Picture: Toby Zerna

“They had been hugely profitable but needed a lot of capital expenditure to restore them to their former glory,” he said. “The feeling around the (Tabcorp) boardroom table was that it was not compatible to have casino and wagering businesses together.”

He said following the demerger there had been major redevelopments of both the Sydney and Gold Coast casinos and the start of the $3.6 billion Queens Wharf’s integrated resort.

Mr O’Neill said the past decade had seen the transformation of the sector from pure gaming to one based more around entertainment, dining and shopping.

“Our objective is to become the best integrated resort company in Australia,” he said. “Traditionally a casinos’ main product was gambling. Then the Crown Melbourne became the gold standard for what was an integrated resort bringing fine dining, hotels and theatres.”

He said the concept gained further traction when Singapore approved casino developments after initially being reluctant to do so.

Mr O’Neill said the sector had been hit hard by Covid-19, but was recovering well on the back of a resurgence in domestic tourism with Gold Coast and Brisbane leading the way.

“Domestic visitors are rising given people can’t travel overseas and want somewhere to go,” he said. He said once international borders reopened, there would be pent up demand from countries in the region including Singapore, Hong Kong and New Zealand.

Star Entertainment chairman John O’Neill at the sod turning ceremony at its development site at Broadbeach. Picture Glenn Hampson

Star chief executive Matt Bekier said the company had invested $5 billion in its properties over the past decade, including $4.5 billion in Queensland.

Mr Bekier said Queen’s Wharf had been the catalyst for the transformation of the company, which probably would not been able to expand as much had it remained with Tabcorp.

“We used to be a very Sydney-centric company with 70 per cent of our revenue coming from NSW and 30 per cent from Queensland,” he said. “Once Queen’s Wharf opens 60 per cent will come from Queensland and 40 per cent from NSW.”

Mr Bekier, who visited Queensland on Friday to thank staff for their efforts during Covid-19, said the company was in good shape helped by the recovery in domestic tourism.

“Both Brisbane and the Gold Coast posted record revenues in May,” he said. “The Gold Coast did more (meaI) covers last month than before Covid, In Brisbane, the Treasury Hotel has a 97 per cent utilisation rate.”

He said the Queen’s Wharf project, due to open next year, would be a big job generator across the city with the company currently advertising 690 roles that needed to be filled.

He added it was important to get international borders open as soon as possible, not only to help with a recovery in tourism but with recruitment of staff.