Bally's Makes a Bold Move for Star Entertainment
Gaming Corporation Bally's Enters Contention in Star Entertainment's Arena, Amidst Industry Fight for Power and Control
US gaming powerhouse, Bally's Corporation, has tossed its hat into the ring with an unsolicited late-Stage proposal to snag a controlling stake in the embattled Australian casino giant, Star Entertainment. This audacious gambit came hot on the heels of a deal Star struck with its Hong Kong associates to stave off impending collapse.
The proposed stake and its value
Bally's is eyeing a controlling stake in Star Entertainment for a minimum of AU$250 million ($158 million).
From the ashes, a resurgence
On Monday, Bally's threw down the gauntlet, casting doubts on Star's Hong Kong deal, brandishing it as an "alternative path." This move came days after Star agreed to divest 50% of Brisbane's integrated resort casino in exchange for AU$53 million ($33.5 million) to Far East Consortium International and Chow Tai Fook Enterprises (CTFE). Star has been embroiled in a financial rescue attempt since February, with this deal being a crucial lifeline.
The Hong Kong deal and its complications
While the Hong Kong partnership included a refinancing deal, providing Star with AU$940 million ($594 million) in debt, Queensland regulators might take issue with committing full control of the Brisbane IRC to CTFE due to its links to convicted junket king, Alvin Chau’s Suncity Group, which could raise red flags.
Bally's proposition
Bally's chairman, Soo Kim, extended an invitation via a letter to Star. Kim's offer involved Bally's underwriting a $158 million capital injection in exchange for 50.1% of Star's shares. Kim also hinted at the possibility of discussing a larger transaction based on the discussions regarding Star's capital and liquidity needs. Kim's letter ended on a persuasive note, emphasizing how Bally's long-term funding and operational prowess could pave the way for Star's brighter future.
The road ahead
The ABC reported that the rescue package offered by the Hong Kong consortium does not guarantee Star's survival. Omkar Joshi, the Chief Investment Officer at Opal Capital Management, praised the additional options presented by Bally's, suggesting it could potentially circumvent the process of administrative proceedings. However, Joshi added that Star's executives must carefully scrutinize the business plans, comparing this fresh proposal from Bally's against other potential investors. Reports indicate that while Star is considering Bally's offer, the deal's progression is far from guaranteed.
The Australian Securities Exchange has suspended trading in Star shares for over a week.
[1] - Bally's strategic investment comprises AU$100 million upfront, with a second tranche of AU$200 million contingent upon shareholder and regulatory approvals
[2] - If the deal gets the necessary green lights, Bally's would control around 56.7% of Star's fully diluted share capital
[3] - Source: Report on business
[4] - Bally's decided against waiting for Star Entertainment to enter administration, which would have complicated the acquisition process - Source: Inside Asian Gaming
- Bally's is proposing a strategic investment into Star Entertainment worth a minimum of AU$250 million ($158 million), which includes an initial AU$100 million upfront and a second tranche of AU$200 million contingent upon shareholder and regulatory approvals.
- If the deal receives the necessary approvals, Bally's would control around 56.7% of Star's fully diluted share capital.
- In an effort to avoid the potential complications of Star Entertainment entering administration, Bally's made an unsolicited late-Stage proposal to secure a controlling stake and pave the way for Star's brighter future, offering long-term funding, operational expertise, and discussing the possibility of a larger transaction based on Star's capital and liquidity needs.
