Star shareholders green light Bally’s led $300m rescue deal

The gaming group’s shareholders have overwhelmingly approved a $300m rescue deal led by US-based casino operator Bally’s after being warned it was the only deal on the table.

Star Entertainment CEO Steve McCann

Star Entertainment shareholders have overwhelmingly approved a $300m rescue deal led by US-based casino operator Bally’s after being warned they would get nothing if the company collapsed into liquidation.

Chair Anne Ward told a shareholder meeting held to approve the transaction on Wednesday that the beleaguered company had “exhausted all options” to secure funding for its survival and the Bally’s deal was the only offer on the table.

“Star has pursued a range of funding options with an increasing degree of urgency over the last 12 months, including asset sales and a variety of recapitalisation proposals,” Ms Ward said.

“The strategic investments are the only remaining funding solution available.”

Star’s board had recommended shareholders accept the deal that will see Bally’s and pubs billionaire Bruce Mathieson’s Investment Holdings take a majority stake in the casino.

More than 99 per cent of shareholders who voted at the meeting approved the deal after being told they would get “zero or close to zero” if the company entered voluntary administration and was liquidated.

Star’s board came under fire from some shareholders for allowing the company’s finances to deteriorate and not considering other alternatives to the Bally’s deal.

Star has faced a series of regulatory and court actions related to its lax anti-money laundering controls and poor corporate governance that has meant its casino licences in both Queensland and NSW are under the control of a government-appointed manager.

Ms Ward said Star was facing a challenging operating environment, including greater competition from pubs and clubs, as well as a potential $400m fine from the financial crimes watchdog Austrac for breach of money laundering controls. Star has warned that a fine of that magnitude could bankrupt the company.

Bally’s chairman Soo Kim,

“The strategic investments by Bally’s and Investment Holdings provide cash funding and assist The Star’s ability to continue as a going concern, helping to avoid outcomes such as voluntary administration, which is likely not to be in the best interests of shareholders,” Ms Ward told the meeting.

She said the board saw a pathway for Star to return to profitability under Bally’s control but did not have any details on its plans for the company.

The deal will involve a $200m investment from Bally’s, which operates a chain of US-based casinos, and $100m from Investment Holdings – controlled by the Mathieson family – in exchange for convertible notes at a conversion price of 8c.

Star shares have slumped 72 per cent to 13c over the past year as its financial woes deepened.

Bally’s will control about 38 per cent of Star, and Mathieson about 23 per cent after dilution. The deal was the “lifeline needed” by the embattled casino operator, Morningstar equity analyst Angus Hewitt said last week.

Star managing director Steve McCann said Bally’s realised the gaming business would not be easy to turn around in the short term, even though the company had properties capable of attracting a lot of people.

“We have some very high quality assets, which we need to reinvest in and reinvigorate,” he said. “It has been hard to get an investor who is prepared to invest in both the gaming and non-gaming sides of this business given the current environment.”

Mr McCann said he had been in contact with Bally’s chairman Soo Kim and Bruce Mathieson Jnr about the company’s operations. “My most recent conversation with Mr Kim, and with Bruce Mathieson Jr was two days ago, and we had a detailed conversation around a range of things, including some current employee issues that we are dealing with,” said Mr McCann.

“It is very important that we go through the approval process, following which they are able to appoint directors and able to exert significant influence over the company.”

Mr McCann disclosed that Star’s Hong Kong joint venture partners in the new Queen’s Wharf integrated resort precinct in Brisbane, Chow Tai Fook and Far East Consortium, had both voted in favour of the Bally’s deal. Star earlier this year agreed to sell its stake in the precinct to the partners in a bid to stay afloat.

Originally published as Star shareholders green light Bally’s led $300m rescue deal