Crown receives merger bid from rival Star; considers Blackstone's raised offer

The Star Entertainment Group has submitted a merger proposal to Crown Resorts, its main rival in Australia, which announced a new CEO.

Star said its offer would create an Australian gaming and hospitality giant with a market value of A$12 billion ($9.4 billion) as it unveiled plans to cut costs, as well as sell and lease back property, at the enlarged group. Minutes earlier, U.S. private-equity firm Blackstone raised its offer for Crown by 4% to A$8.36 billion. Crown said it’s assessing both proposals, Bloomberg reports.

Both offers are higher than the share price has been since mid-January 2020. The price crashed in March last year as the pandemic took hold, and as hearings for the Bergin inquiry into Crown Resorts' fitness to hold a casino licence for its new Barangaroo casino on Sydney Harbour confirmed media reporting about links to criminal gangs and rampant money-laundering. Star is pitching its offer as a way to potentially solve Crown's regulatory woes, which continue to stop its new casino in Sydney from commencing gaming operations.

Star chairman John O'Neill said the merger would create a A$12 billion casino and entertainment company listed on the ASX. "A merger of The Star and Crown would result in significant scale and diversification and unlock an estimated $2 billion in net value from synergies," he said in a statement to shareholders, as reported by ABC News. "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."

Crown's biggest shareholder, James Packer, is keen to exit the business, which may also assist the company in gaining NSW regulatory approvals. The competing proposals offer him differing paths forward after he failed at least twice to sell his stake.

Packer, whose influence on Crown was criticized in the regulatory report in February, has increasingly stepped back from corporate life to fight a mental health battle. The Blackstone bid would give him a potential clean break. Star’s proposal offers the billionaire the chance to swap at least some of his 37% stake in Crown for a smaller share in the merged entity.

Last month, another exit path from Crown emerged for Packer when Oaktree Capital Management LP offered to help Crown purchase the billionaire’s shares. The board of Crown, with the outcome of the Perth and Melbourne inquiries hanging over the company, must now weigh up the instant reward of Blackstone’s cash offer with the potential long-term benefits of a union with Star.

A merger of the two companies would also require approval by the Australian Competition and Consumer Commission, which confirmed Star had been in touch. "Star Entertainment Group has approached the ACCC regarding its indicative proposal to merge with Crown Resorts," said a spokesperson from the competition regulator. "We will wait for a submission and commence a public review after that, if the matter progresses."

Crown's board said it had not yet formed a view on the merger proposal or on Blackstone's increased takeover offer, and advised that shareholders did not need to take any action at this stage.

Crown also announced that it had appointed current Lendlease chief executive Steve McCann as its new CEO and managing director. Chair Helen Coonan has been doing double-duty as interim chief executive since February. At that time CEO Ken Barton resigned as part of a clear-out of directors and executives in the wake of the New South Wales inquiry.