Shareholders of The Star Entertainment are understood to have made approaches to prospective suitors of the $2.86bn listed casino operator, offering up their shares in what some believe is a sign that the company is a takeover target.
It is understood that among the parties to have received an approach is New York-based buyout fund Blackstone, which is currently in the process of launching an $8.9bn acquisition of Star’s larger rival, Crown Resorts.
Other parties have also been offered stakes, say sources.
Among Star’s largest shareholders are Cooper Investors, L1 Capital, Bennelong Funds Management and State Street Corp, all with holdings between 5 per cent and 7 per cent, according to Bloomberg data.
It comes as Star, in a similar way to Crown, finds itself at the centre of investigations surrounding allegations it enabled money laundering at its Australian casinos, which are in Sydney and Queensland.
Sources believe that merging Crown and Star together would make a lot of sense for Blackstone.
Star launched a scrip merger proposal with Crown on May 10 last year, trumpeting cost synergies of between $150m and $200m a year.
But it withdrew its offer in July.
The question is whether Blackstone would gain regulatory approval to bring the two companies together.
Other likely buyers of Star are thought to be Apollo Global Management, which owns gambling assets, and TPG Capital, which has a track record of casino ownership.
The problem for other private equity firms is that they are limited from owning casinos due to their investors placing restrictions around where they place their money, targeting only businesses that promote good environmental, social and governance practices.
Blackstone is likely to be interested in exploring the opportunity of owning Star further down the track, say sources, but the question is whether a group such as Apollo or TPG beats it to the punch.
Shareholders in Crown are due to vote on Blackstone’s proposal on May 20.
Star’s share price has been sent reeling from the global pandemic and has failed to recover due to the departure of its chief executive Matt Bekier and three other executives.
This is amid damning revelations from a royal commission-style inquiry headed by Adam Bell SC to determine if Star is fit to hold a NSW casino licence.
Last year Star hired the Matthew Grounds-led investment bank Barrenjoey and has also been working with Credit Suisse, earlier fuelling a theory that it may try to make another rival offer for Crown.
But that was before the full fallout from money-laundering allegations.
Attractive to any buyer of Star is its property portfolio.
Star owns the majority of its $2.3bn Pyrmont casino site at Sydney’s Darling Harbour and such a deal makes it appealing to private equity.
Kohlberg Kravis Roberts currently has a $20bn buyout proposal on the table for Ramsay Health Care and sources believe it has been in search of at least $8bn for a follow-on sale of its property assets.
The properties may be offloaded to a party such as Charter Hall or North West Properties or retained for its own fund. Earlier, Star Entertainment ran an auction of its property portfolio and it resulted in Charter Hall buying its Treasury Casino, hotel buildings and its Queen’s Gardens Carpark for $248m.
Shares in Star closed down 1.99 per cent at $2.95.
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