An assessment process has begun by the Board of Directors at Crown Resorts Limited relating to three separate merger proposals received from The Star Entertainment Group, The Blackstone Group and Oaktree Capital.
Citing “substantial value that would be unlocked by a merger”, The Star has submitted to the Australian Stock Exchange a conditional, non-binding, indicative proposal to merge with Crown Resorts Limited via a nil-premium share exchange ratio of 2.68 The Star shares per Crown share, altogether valued at AUD$12 billion.
Separately, a revised and unsolicited, non-binding and indicative proposal has been received from private equity firm, The Blackstone Group, to acquire all of the remaining shares in Crown at an initial offer price of AUD$12.35 per share in a takeover proposal worth AUD$9 billion inclusive of existing debt. Blackstone currently owns around 10% of James Packer’s organisation as part of an AUD$800 billion asset portfolio currently under management, which also includes American casinos MGM Grand and Mandalay Bay.
The price per share offer has increased by $0.50 cents per share from an offer previously issued by the group.
The third offer currently in market comes from US Investment Fund, Oaktree Capital, which has tabled a USD$3 billion offer for James Packer’s 37% stake in Crown Resorts. With the two other offers in play, it is understood the Oaktree offer is viewed less than favourably.
According to The Star, the combination of the two entities would create a national tourism and entertainment leader with integrated casino and resort attractions, strong balance sheets and free up cashflow to speed up debt repayment and pursue new investments.
The merger proposal came on the same day Crown Resorts announced former Lendlease CEO, Steve McCann, would take over as Chief Executive Officer and Managing Director of Crown, following the resignation of Ken Barton earlier this year.
The ASX statement says annual cost synergies made possible via a merger would be in the realm of AUD$150 million to AUD$200 million. Numerous growth opportunities would become possible, The Star said, with new marketing and events, technology initiatives, online capability investments and a combined loyalty program to enhance value for members.
Flagstaff Partners and Credit Suisse have been appointed by The Star as financial advisors and facilitators, with legal assistance to be provided by King & Wood Mallesons as it relates to the proposal. The Star is seeking an 8-12 week Due Diligence period following the signing of a mutual confidentiality agreement.
The Star Chairman, John O’Neill, said the combined group would unlock an estimated AUD$2 billion 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,” he said.
If successful, the merged entity would see a new Board created, comprised of the current members of both The Star and Crown Resorts Boards, with pro-forma ownership of 59% for Crown shareholders and 41% for The Star shareholders. In its own statement, Crown Resorts said it had not yet formed an official view on the proposal, with “no certainty” currently evident that the merger proposal will result in a transaction.
Along with other regulatory bodies which must assess the proposal if interest is expressed by Crown, the Australian Competition and Consumer Commission confirmed it had been approached by The Star relating to its proposal and was awaiting a formal submission ahead of a public review, if the matter progresses.