Just days after announcing an agreement with its Hong Kong partners to sell off its 50% stake in The Star Brisbane, Star Entertainment Group may have stumbled across another lifeline: US casino investor Bally’s Corporation has made a last-minute bid to acquire the company.
Inside Asian Gaming understands that Star chairperson Anne Ward has received a letter from Bally’s and its chairman, Soo Kim, outlining an offer to inject at least AU$250 million (US$158 million) in cash, as well as its proven expertise in reversing the fortunes of troubled casinos.
The deal describes an “alternative path” to the sell-off agreed with Chow Tai Fook Enterprises and Far East Consortium on Friday that would see the two companies acquire Star’s 50% stake in their joint venture Brisbane resort – but split Star Entertainment into two distinct pieces of the pie, a Brisbane slice, and Gold Coast plus Sydney slice.
The Bally’s offer reflects comments made by Kim in a recent interview with IAG in which he outlined his belief that Star offered greater potential with all of its assets retained than were it to be broken up and sold off for parts.
Kim’s letter promises Bally’s will “move quickly and enter into a binding agreement” to recapitalize Star with a capital injection of at least AU$250 million to be raised through an issue of convertible notes subordinated to Star’s principal lenders – convertible into at least 50.1% of Star’s fully diluted ordinary shares.
While the 50.1% share of Star would give Bally’s control of the company, Bally’s emphasized its willingness to own more, with the letter stating, “To be clear, we remain very open to discussing a larger transaction depending on our discussions with respect to Star’s liquidity and capital needs.
“We would also be happy to explore alternative structures that would similarly preserve value for all key constituents, including regulators, creditors, equity holders and employees.
Bally’s also made it clear it had access to the cash needed to consummate the deal, stating, “Our proposal is fully funded and not subject to any financing contingencies.”
Bally’s said it has access to nearly US$800 million (AU$1.27 billion) in cash and available credit and would “underwrite the entirety” of the offering. “In short, we have ample unrestricted liquidity to complete this transaction expeditiously,” the company said.
Reiterating that keeping Star’s assets together would “provide a stronger business over time”, the letter goes on to say, “While we understand the rationale for Star’s recently announced transactions, we believe that our proposal offers Star and its stakeholders far greater value and operational flexibility, as well as the upside from retaining Star’s current projects and other assets.
“We have already completed substantial due diligence based on publicly available information and leveraging our understanding of the Australian gaming market and extensive experience in the international gaming sector.
“As a result, we are well positioned to work with Star in a focused manner to deliver a binding proposal within a short period of time.”
IAG understands that Bally’s expects the proposal to be fully funded and not dependent on any financing contingencies, with the company also promising to “partner with Star in deploying our significant operating experience in turning around casino assets and growing highly successful casino businesses globally.”
Star, which has confirmed it has already received AU$35 million (US$22 million) from its Hong Kong partners in relation to the deal announced late last week, also revealed Friday that it is in discussions around a refinancing of its debts, which total more than AU$400 million (US$252 million).
The company was said to have been on the brink of insolvency before Friday’s Brisbane sell-off was confirmed.
Rhode Island-based Bally’s describes itself as “a global casino-entertainment company with a growing omni-channel presence”. The company owns and operates 19 casinos across 11 US states, a horse racetrack in Colorado, and holds online sports betting licenses in 13 North American jurisdictions. Bally’s recently acquired Aspers Casino in Newcastle, UK and its interactive international division has significant market shares in the United Kingdom and Spain, operating a number of brands including Virgin Games, Monopoly Casino and Bally Bet. The company is also a significant investor in Intralot SA, a global lottery management and services business.
The combined Bally’s portfolio has approximately 17,700 slot machines, over 600 table games and nearly 4,000 hotel rooms, with around 11,500 employees.
Bally’s also holds rights to developable land in Las Vegas at the site of the former Tropicana Las Vegas and is currently developing Bally’s Chicago.
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