The Star Entertainment Group likely to await review before second attempt at Crown merger

The chair of the NSW gaming regulator says any future play for Crown Resorts by rival Star may not get probity until next year.

The Star rebuffed recent allegations as ‘misleading’, but they sent its share price down more than 20 per cent. Above, the Sydney building. Picture: Bloomberg

Any future merger or takeover play pitched by The Star Entertainment Group for Crown Resorts is unlikely to receive regulatory approval in NSW until a probe into The Star’s Sydney casino next year, according to the chair of the state’s gaming regulator Philip Crawford.

But in the meantime rival Crown Resorts’ suitor and nearly 10 per cent shareholder Blackstone is approaching the end of its probity process with the NSW Independent Liquor and Gaming Authority (ILGA), putting it in a position to have another tilt at Crown if it passes its regulatory checks.

“I would expect that the due diligence and discussion with Blackstone on their probity will be completed by the end of the month,” Mr Crawford told The Australian on Tuesday.

Chair of the NSW Independent Liquor & Gaming Authority Philip Crawford. Picture: NCA NewsWire/Joel Carrett

It comes after media reports on Sunday alleged that The Star courted high-risk gamblers at its casinos while not acting on independent reviews that showed its anti-money laundering systems were deficient.

Although The Star rebuffed the allegations as “misleading”, they sent its share price down over 20 per cent while raising questions about what might happen to its Sydney casino licence when ILGA finalises its regular review of Star Sydney in March next year.

Shares in The Star closed at $3.21, down a further 2.7 per cent on Tuesday.

On Tuesday night The Star further pushed back against the media reports, saying it was “incorrect” to allege it did not implement the recommendations of the independent reviews.

The allegations mirror those made against Crown that led to the formation of the Bergin Inquiry, which temporarily revoked its NSW casino licence earlier this year and two royal commissions into the company’s operations in Victoria and Western Australia.

The controversies weakened Crown’s share price and led to a $12bn merger proposal from The Star, which was withdrawn, and followed by two takeover bids from Blackstone, which were knocked back by Crown Resorts.

However, both players have signalled they remain interested in Crown’s assets and are closely watching whether the company will be allowed to maintain control of its Melbourne casino when the recommendations of the Victorian commission are made public in the coming weeks.

Mr Crawford said that probity checks on The Star’s merger proposal halted when the offer was withdrawn in July and would have to start up again if it came back with a different offer.

“We put the pause button on that at the moment, but we will rekindle our interest when things start to move again,” he said.

“We plan to wait and see what offer they are making in due course – if they make another one – what that looks like and leading from that, what our requirements would be.”

He added that regulatory approval of any offer would likely have to wait until the outcome of ILGA’s regular review of The Star’s suitability to run its Sydney casino, which is being headed by the former senior lead counsel assisting the Bergin Inquiry, Adam Bell SC.

“We’d want to complete the review probably before we are able to give a clean bill of health, we are carrying out a review at the moment, as you know, and that would impact on our decision-making process for sure,” Mr Crawford said.

“We’ve got a board meeting tomorrow to discuss it then but I would have thought that that’s certainly the case because we’d need to understand (what) our own probity requirements are going to be, and that will be partly informed by the Bell inquiry, and one feeds into another.”

Mr Bell will report to the NSW government on March 31 next year, but that timeline could be extended, with NSW Services Minister Victor Dominello saying the government would consider supporting opening the inquiry up to public hearings.

“If in the course of the review ILGA or Mr Bell recommend that public hearings are required, the government will consider that request and provide additional resources to the inquiry if required,” he said.

In a note to clients, JP Morgan analyst Don Carducci said it was unlikely that The Star would lose control of its Sydney casino as a result of the Bell review, but further regulatory action was possible.

“We believe it is far too early (and improbable, in our view), to discuss The Star losing its licence(s), but there could be a similar review into suitability and/or a royal commission in NSW,” he wrote.

More broadly, Mr Carducci said he expected royal commissions would also be launched into casinos in Queensland, where Star operates two venues, and South Australia, where the sole casino is operated by Auckland-based SkyCity Entertainment Group.

“Given it appears no casino has operated in accordance with both the court of public opinion or their state’s respective framework, the states will need to review the ‘go-forward’,” he wrote.