Bally’s plays hardball
Bally’s Corporation has made an unsolicited, eleventh-hour approach for a controlling stake in the troubled Australian gaming giant Star Entertainment. The move by the US gambling powerhouse came just days after Star reached a deal with its Hong Kong partners to save it from collapse.
controlling stake for a minimum of AU$250m
According to Australian media, Star is considering the US bid, which would give Bally’s a controlling stake in the casino group for a minimum of AU$250m ($158m).
Monday’s aggressive move by Bally’s came, however, after Star reached a deal Friday to stave off administration by agreeing to a deal with its Hong Kong partners.
Bally’s unceremoniously challenged the Hong Kong deal, calling its offer “an alternative path.”
Race to pick up falling Star
In dire need of a lifeline, Star agreed on Friday to offload its 50% stake in Brisbane Queen’s Wharf integrated resort casino to Far East Consortium International and Chow Tai Fook Enterprises (CTFE) in exchange for AU$53m ($33.5m).
CFTE’s entry pulled Star back from collapse; the beleaguered group has been seeking a financial rescue deal since February.
While the Hong Kong bid included a refinancing deal which gives Star access to AU$940m ($594m) in debt, Queensland regulators may question handing CTFE full control of the Brisbane IRC, given its past links to convicted junket king Alvin Chau’s Suncity Group.
Bally’s “alternative path” throws up many appealing options for both Star and regulators for whom the mention of Alvin Chau likely raises instant red flags.
very open to discussing a larger transaction”
Bally’s offer came directly to Star via a letter from its chairman Soo Kim. Kim proposed a Bally’s-underwritten $158m capital funding in exchange for 50.1% of Star’s shares. Bally’s chairman added his gaming firm was also “very open to discussing a larger transaction depending on our discussions with respect to Star’s liquidity and capital needs.”
Kim signed off with a call to action that Bally’s long-term funding and operational pedigree “will unlock the best alternative for Star and its shareholders.”
What next?
The Australian Broadcasting Corporation cited a chief investment officer as stating the rescue deal Hong Kong offered Star Friday doesn’t mean the casino giant won’t collapse.
Opal Capital Management’s Omkar Joshi added Bally’s entry was “good to see” because giving Star options means it could bypass the process of voluntary administration.
Joshi cautioned, however, that Star’s executive had work to do in comparing the business plans and “seeing if this latest proposal from Bally potentially brings out others as well.” Media reports state while Star is looking at Bally’s offer, there is no guarantee it will progress any further.
The Australian Securities Exchange has suspended trading in Star shares for over a week.