July 25, 2024

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Hard Rock Hotel Mulls Bid for Star Entertainment, AFR Reports

Hard Rock Hotel Mulls Bid for Star Entertainment, AFR Reports

(Bloomberg) — Shares in Star Entertainment Group Ltd. jumped after approaches from suitors including a Hard Rock Hotels & Resorts consortium triggered expectations of a bidding war for the troubled Australian casino operator. 

Star “has received inbound interest from a number of external parties regarding potential transactions,” the Sydney-based company said early Monday. “At this stage, none of the approaches has resulted in substantive discussions.”

Shortly afterwards, Star said one of the possible buyers was a group of investors that included Hard Rock Hotels & Resorts (Pacific).

Star stock soared 23% after the disclosures, lifting the company’s market value to A$1.6 billion ($1.1 billion). While a new owner might offer a potential financial lifeline, Star’s future remains far from certain. A regulatory inquiry is currently assessing whether the business has sufficiently addressed corporate wrongdoing to keep its gaming license at its flagship Sydney casino.

The Sydney casino has been run by a government-appointed manager since a damning report in 2022 found it had lax anti-money laundering controls, allowed patrons to flout China’s capital controls and encouraged problem gamblers. 

At the same time, Star is searching for new leadership after its chief executive officer and chairman resigned this year. Before today, the company’s shares had tumbled 60% in the past 12 months, making even the crisis-ridden company a cut-price takeover target for global buyers.

Read More: Star Chair and Ex-CEO Plotted to Oust Regulator, Hearing Told

Star’s disclosures on Monday followed a report in the Australian Financial Review that a group led by Hard Rock Hotel & Casino, operator of The Mirage in Las Vegas and other casino resorts in North America, had recently submitted an offer to Star. According to the newspaper, the proposal included injecting fresh capital into Star, re-branding the company and separating its properties from the casinos.

 

It’s not clear what any successful buyer of Star would end up owning. The Sydney inquiry’s final report is due July 31. Meanwhile, Star’s two other casinos  — in the Gold Coast and Brisbane in the state of Queensland  —- are also operating under government caretakers.

Hard Rock is working with Australian and US investors on its Star proposal and is being advised by KPMG, according to the AFR report. The bid aims to turn the Australian company into a business less dependent on casino income and more focused on entertainment, restaurants and hotels, the report said. Hard Rock didn’t respond to questions, the Australian Financial Review reported.

Star’s main casino rival in Australia, Crown Resorts Ltd., went through similar suitability inquiries in recent years in New South Wales, Victoria and Western Australia that exposed a litany of wrongdoing. 

Crown, now owned by Blackstone Inc., in March this year was allowed to keep the license to operate its flagship Melbourne casino after the regulator judged it had undertaken sufficient governance and anti-money laundering reforms under its government monitor.

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