The Star (ASX:SGR) tables $12b merger bid for casino rival Crown Resorts (ASX:CWN)

Company News

by Michael Luu

Casino giant Crown Resorts (ASX:CWN) has been presented with another restructuring pathway, as its gaming rival The Star Entertainment Group (ASX:SGR) has entered the bidding war against US investment firm Blackstone for the troubled gaming business.

The James Packer-backed company has confirmed its receipt of a $12 billion merger offer from the Star, which would form Australia’s biggest gaming and entertainment corporation, owning seven of of the country’s most popular casinos.

The prospective gambling behemoth has the potential to achieve $150 million to $200 million in cost synergies, as the joint venture would represent around $2 billion in net value.

The unsolicited, conditional, non-binding and indicative proposal will involve a scheme of arrangement, where shareholders could choose between new shares and a cash consideration for their Crown shares.

The cash offer is worth $12.50 per Crown share but has a limit of 25 per cent of Crown’s total shares on issue. A fully accepted cash consideration would incur an ownership structure, where Crown shareholders will make up 59 per cent and Star shareholders will account for 41 per cent of the merged entity’s stake composition.

Alternatively, investors could gain 2.68 Star shares for every Crown share owned, which represents a direct premium-free exchange.

The Star has highlighted that the merger will benefit Crown’s recovery, as the bidder’s experience from Queensland and NSW operations will accelerate the beleaguered gambling business’ return to good standing faster than other suitors.

A merger between the entertainment and hospitality giants would be subject to consideration and approval by competition watchdog the ACCC.

Shares in Crown Resorts (ASX:CWN) are trading 5.8 per cent higher at $12.82