The Star Entertainment Group has tabled a AU$12bn merger proposal to Crown Resorts, which it believes would create a “national tourism and entertainment leader”.
The proposal pits the casino operator against Blackstone Group, which already owns a little under ten per cent of the group and has revised its offer to $12.35 per share after tabling a bid of $11.85 each, valuing the group at AU$8bn, last month.
This was followed up by US investment firm Oaktree making its own approach with a $3bn proposition to purchase the 37 per cent stake held by major shareholder James Packer.
Star believes that merging the two businesses would deliver between $150m to $200m of cost synergies per annum, with an estimated net value of $2bn.
The conditional, non-binding, indicative proposal offers 2.68 Star shares per Crown share, which the former says creates an implied value of $14 per share of the Melbourne headquartered group.
Furthermore, the merger proposal also contemplates a cash alternative of $12.50 per Crown share, subject to a cap equal to 25 per cent of the company’s total shares on issue.
Pro forma ownership of the merged entity would be 59 per cent for Crown shareholders and 41 per cent for its Star counterparts, with the board to initially comprise the current directors of both.
Star also says that it could unlock significant value from a sale and leaseback of the enlarged property portfolio, with additional growth opportunities a possibility across marketing and events, digital and technology initiatives, investment in online capabilities and optimisation of a combined loyalty program to deliver enhanced value for members
John O’Neill, star chairperson, explained: “A merger of The Star and Crown would result in significant scale and diversification and unlock an estimated $2bn in net value from synergies.
“With a portfolio of world-class properties across four States in Australia’s most attractive and populated catchment areas and tourism hubs, the combined group would be a compelling investment proposition and one of the largest and most attractive integrated resort operators in the Asia Pacific region.”
The battle to acquire Crown comes after the group was deemed unfit to operate the $2.2bn Crown Sydney Hotel Resort following a New South Wales Independent Liquor and Gaming Authority inquiry which cited poor corporate governance, deficient risk-management structures and processes, and a poor corporate culture.
This has seen subsequent investigations launched within the states of Victoria and Western Australia, where the organisation also boasts operations.