Crown Resorts and its biggest shareholder James Packer face growing uncertainty about its future value, with rival casino group Star Entertainment on Friday morning dropping its $12 billion deal.
It seems the string of bad news from the just completed Royal Commission in Victoria into Crown Casino, has spooked Star into withdrawing from the field.
Star had offered 2.68 Star shares for each Crown share or a cash alternative of $12.50 a Crown share subject to a cap equal to 25% of Crown’s total shares on issue. Star further claimed that it could wring around $200 million worth synergies from the merger which would effectively lift the value of the bid to $14 billion. Those claims were in the realm of fantasy.
The Star said it had limited engagement with Crown since the proposal was lobbed in May, and was concerned that the issues at the Commission regarding Crown Melbourne could materially impact the business, including whether it retains the licence to operate its Melbourne casino or the conditions under which its licence is retained.
“We continue to believe substantial benefits could be unlocked by a merger, 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,” the company said in a release to the ASX.
“The Star remains open to exploring potential value-enhancing opportunities with Crown”.
The Star said it will continue to closely monitor the Victorian royal commission and Perth casino royal commission, with final findings expected later this year.
Star said it “remains focused on its growth initiatives including its world-class multi-billion dollar Queen’s Wharf Brisbane integrated resort due to open in late 2022 and its Gold Coast masterplan. The Star will report its financial results for FY2021 on 19 August 2021.”
Crown shares closed at $10.25 on Thursday and Star shares closed at $3.55. At that level the Star offer was worth (on paper) $9.51, well under the cash component – that was the market signalling the bid was dead duck.
