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Australia's Star Entertainment pulls $6.6bn bid for Crown Resorts

Casino operator says it may consider a tie-up with the troubled company

The decision removes a lifeline for Crown which has been trying to convince regulators it can rebuild its culture after an earlier inquiry in February found it allowed money laundering on its premises for years.   © Reuters

Australian casino operator Star Entertainment Group on Friday withdrew a A$9 billion ($6.6 billion) buyout proposal for rival Crown Resorts Ltd after an inquiry heard the target should lose its main licence, sending its shares lower.

Star, the country's No. 2 casino operator, said it may yet consider a tie-up with the troubled larger company, but was concerned about the impact of an inquiry on its value "including whether it retains the licence to operate its Melbourne casino or the conditions under which its licence is retained."

The decision removes a lifeline for Crown which has been trying to convince regulators it can rebuild its culture after an earlier inquiry in February found it allowed money laundering on its premises for years and declared the company unfit to open a just-built casino in Sydney.

That inquiry, along with venue closures due to COVID-19 lockdowns around the country, had put downward pressure on Crown's shares, sparking at least two takeover approaches for the company in which billionaire James Packer has a 37% stake.

A subsequent inquiry was told this week Crown should also be stripped of its gambling licence for the Melbourne resort, whose casino generates about three quarters of its profit, due to insufficient efforts to reform its culture.

Crown shares fell up to 4% in early trading on Friday, against a broader market decline of 0.25%, taking its value to levels before the merger and acquisition approaches began in March.

"I think it was more the price Star wanted to back away from," said Nathan Bell, portfolio manager of Intelligent Investor, which has shares in both companies. "It may still be a bidder yet, as I'm sure the regulators would prefer a local operator to own our casino licenses."

Goldman Sachs analysts said in a research note that Star's decision to pull the indicative offer was unsurprising and that it may ultimately benefit from restrictions placed on its rival.

Star shares rose up to 1%.

Crown said in a statement it remains willing to engage with Star, and will continue to consider any proposal it receives.

Crown rejected a lower-priced proposal from buyout giant Blackstone Group in May, leaving Star's approach as its main option to show regulators it could overhaul itself under new ownership.

Crown does have another option on the table, with Oaktree Capital Group submitting in April a proposal to bankroll a A$3 billion buyback of Packer's stake.

If the proposal materialises, it would remove a regulatory concern, which was Packer's influence over the board and its decision making.

(Reuters)

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