By Colin Kruger and Supratim Adhikari
The board of Star Entertainment are backing a deal that will keep the casino operator’s doors open, but it will hand the keys to US suitor Bally’s in return for a $300 million cash injection that might also include pokies billionaire Bruce Mathieson.
Under the terms, Bally’s will inject up to $300 million as proposed last month, but this will be reduced if Star’s majority shareholder, Mathieson, agrees to tip in $100 million, Star said in an ASX announcement on Monday.
Star Entertainment has reportedly found a way to stay alive with a new deal.Credit: Bloomberg
The deal was first reported in The Australian Financial Review. With its cash running out within days, Star said it expects to receive $100 million by Wednesday, although this is still subject to the consent of its lenders.
The remaining $200 million is subject to shareholder vote as it will hand close to 57 per cent of the business to Bally’s and Mathieson, if he chooses to participate in the rescue.
“The board of The Star intends to unanimously recommend that The Star shareholders vote in favour of the transaction, in the absence of a superior proposal and subject to an independent expert concluding (and continuing to conclude) that the transaction is in the best interests of The Star’s shareholders,” Star said in its statement to the ASX.
Star is hoping its majority shareholder, billionaire Bruce Mathieson, will tip in $100 million.Credit: Arsineh Houspian
Star’s board said they are preparing the company’s much-delayed December half-year accounts for release and intend to lodge it as soon as possible. The release of the accounts was delayed by the financial uncertainty at Star which meant the board could not assure the market that it was a going concern.
Bally’s chairman Soo Kim inspected Star’s casinos this year when Bally’s was considering bidding for assets if Star entered administration.
Bally’s runs 19 casinos that Kim has acquired in distressed sales over the years. Star would be the latest.
Kim made his name with a hedge fund Standard General, which specialised in picking up distressed assets in regulated industries such as casinos, cannabis, tobacco and television – which led to it being labelled a vulture fund by rivals.
In a 2022 interview with Forbes, Kim said he hated the “sin” label put on the first three of these industries.
“Whether it’s cannabis, to a lesser degree nicotine, or gambling, these are things Americans want to do. And if they’re not allowed to do it, they’re still going to do it, it’s just going to be underground,” he said.
More recently, he spoke of his interest in Star.
We “don’t mind running into the proverbial smoking building”, Kim said in an interview after he visited Star’s assets in Australia and before Bally’s lobbed its offer.
He described the trip as a “mystery shopping” experience. He clearly liked what he saw, especially at The Star’s flagship Sydney casino.
“We’re almost struggling to understand why it’s performing so poorly,” he said.
Bally’s chief Soo Kim and the Bally’s casino in Las Vegas.Credit: Getty
Star has been embroiled in a spiralling financial crisis since last year as gambling revenue fell and regulatory costs mounted following a run of scandals – including revelations of facilitating money laundering and allowing organised crime to operate on its premises – which led to the loss of all three casino licences.
The move to cashless gaming in NSW (Queensland is to follow) is already eating into its lucrative poker machine revenue.
Bally’s appeared as a potential suitor for Star in March, just as Star was offloading its stake in the Queen’s Wharf casino resort in Brisbane to the Hong Kong-based Far East Consortium and Chow Tai Fook Enterprises – and took full ownership of property developments at the Gold Coast resort – in return for more than $50 million cash, which staved off administration.
Bally’s entered the frame when Star’s talks with investment company Salter Brothers, to secure a debt funding lifeline of as much as $940 million to provide the financing needed to secure its long-term future, fell through last week.
The unsolicited and conditional proposal from Bally’s, announced in March, involved the issue of convertible notes subordinated to The Star’s existing senior lenders.
But before that conversion can happen, Bally’s would need to receive Foreign Investment Review Board approval; receive probity approval from the state casino regulators in NSW and Queensland; as well as approval to own such a large stake in the casino operator.
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