The Star Entertainment Group has withdrawn its proposed merger with Crown Resorts, citing uncertainties about the company’s future prospects and a lack of interest in the deal.
Significant strategic and value accretion benefits for both companies’ shareholders were outlined in the proposal, including estimated cost synergies of $150 million to $200 million per year and the potential to create significant value from a sale and leaseback (or similar structure) of the enlarged property portfolio.
Following the proposal, Star reports that it has had “limited engagement” with Crown Resorts, and that issues raised at Victoria’s Royal Commission into Crown Melbourne have the potential to materially impact Crown’s value, including whether it retains its Melbourne casino licence or the conditions under which it retains it.
Following that, the company has placed a greater emphasis on its current expansion efforts, such as the multibillion-dollar Queen’s Wharf Brisbane integrated resort, which is set to open in late 2022, and the Gold Coast masterplan.
Uncertainty surrounding Crown
“We continue to believe substantial benefits could be unlocked by a merger,” the company said in a statement to the media. “However, the uncertainty surrounding Crown is such that The Star is unable to continue at the present time with its proposal in the form as announced on 10 May 2021.
“The Star remains open to exploring potential value enhancing opportunities with Crown. The Star will continue to closely monitor the Victorian Royal Commission and Perth Casino royal commission, with final findings expected later this year.”
After a New South Wales Independent Liquor and Gaming Authority inquiry found the group unfit to operate the $2.2 billion Crown Sydney Hotel Resort due to poor corporate governance, deficient risk-management structures and processes, and a poor corporate culture, the group was deemed unfit to operate the $2.2 billion Crown Sydney Hotel Resort.
As a result, investigations have been begun in the Australian states of Victoria and Western Australia, where the organisation also operates.