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Star Entertainment Bids $12 Billion For Troubled Crown Resorts Australia
By Shane Addinall May 12, 2021 IndustryThe well-established Australian gambling and entertainment group, Crown Resorts, has been having a difficult time of late both financially and legally, could a multi-billion merger be just the thing they need to right the ship?Crown Resorts is one of Australia’s most recognisable gambling and entertainment groups comprising the Crown Melbourne Entertainment Complex, Crown Perth, Crown Sydney, and the exclusive Crown London Aspinalls venue.
Despite its reputation amongst Australian gamblers the last twenty-four months have been especially challenging for the group which, like most land-based gambling and entertainment providers, relies heavily on foot traffic.
The Knocking at The Door
The 2020 Crown Resorts annual report was less than stellar with significant declines in profitability across the board.
So much so that Ken Barton, Crown CEO, said:
“2020 has been an extremely challenging year. From late January 2020, Crown began to experience softer trading conditions as a result of travel restrictions and general community uncertainty, particularly impacting visitation to Crown Melbourne. In March 2020, Crown was directed to close its gaming activities and a significant part of its non-gaming operations at Crown Melbourne and Crown Perth for an extended period, with our financial results reflecting the impact of these closures.”
The report continues to outline how 95% of the company’s employees stood to lose their jobs were it not for the Commonwealth Government’s ‘JobKeeper program’ which had to intervene in order to save thousands of jobs across the group.
If that was not enough of a storm for the gambling group to weather Crown Perth is currently the focus of a royal commission.
The commission is looking into suspicious relationships between Michael Connolly, a previous chief casino officer for the Western Australian gaming authority, and staff members of Crown Perth.
There are also further allegations that operations at Crown Perth are so poor that the casino no longer qualifies to retain its gambling license. This would be devastating for the group as earlier this year a commission found Crown Sydney guilty of money laundering and other financial crimes, leading to it losing its licence.
Cash Is Always King
Amidst this furore, however, there are those who are bullish about the restoration of Australia’s gambling market and are looking to invest in the industry.
Crown Resorts competitor the Star Entertainment Group has offered the princely sum of AU$12 billion (€7.7 billion) to merge the two groups into a single unified Australian gambling powerhouse.
Hot on the heel of the news that Star Entertainment had made a serious offer a Crown Resorts spokesperson confirmed that they had received an “enhanced offer” from a company linked to an existing Crown investor, Blackstone.
While the new offer does increase Crown share valuation to $12.35 per unit it is still a long way off the 2019 valuation of $14.00 the casino group received when it was in negotiations with Melco Resorts.
Billionaire James McCann holds a 37% stake in Crown Resorts and whether or not the board is able to act on either of the current offers sits firmly in his grasp. However, given his antagonistic history with Star Entertainment, it is not likely he will consider their offer unless they up the ante considerably.
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