Australias Star Entertainment Group has submitted a conditional, non-binding, indicative proposal to merge with Crown Resorts in a deal that, should it proceed, would see the nations two casino giants come together as one.
According to details released via the ASX on Monday morning, the proposal values Crowns shares in excess of AU$14 per share exceeding the value put forward by competing bids in recent weeks which value Crown at closer to AU$12 per share.
Those competing bids include a revised offer from American multinational private equity and hedge fund giant The Blackstone Group, received over the weekend, which increases its bid from an original AU$11.85 per share to AU$12.35 per share.
US global asset management firm Oaktree Capital Management L.P. has also proposed a AU$3 billion offer to acquire the 37% stake in Crown currently held by James Packers Consolidated Press Holdings.
However, Star has today outlined its case for a merger, with the offer representing a share exchange ratio of 2.68 The Star shares per Crown share with a cash alternative of AU$12.50 per Crown share for up to 25% of Crowns issued share capital.
Based on recent trading values of The Star and the substantial value that would be unlocked by a merger, The Star estimates its pro forma share price to be more than AU$5 per share, implying potential value of the Scrip Consideration in excess of AU$14 per Crown share, it said.
The Star said it believes a merger represents a compelling value proposition for all shareholders by creating a national tourism and entertainment leader with a world-class portfolio of integrated resorts with enhanced scale and geographic earnings diversification, significant balance sheet strength and free cash flow generation.
It would also allow for AU$150 million to AU$200 million in cost synergies per annum with an estimated net value of AU$2 billion.
A merger of The Star and Crown would result in significant scale and diversification and unlock an estimated AU$2 billion in net value from synergies, said Star Chairman John ONeill.
With a portfolio of world-class properties across four states in Australias most attractive and populated catchment areas and tourism hubs, the combined group would be a compelling investment proposition and one of the largest and most attractive integrated resort operators in the Asia Pacific region.
According to Star, a merger would also open the door for potential sale and leaseback opportunities on some of the groups enhance property portfolio leaving the door open for the likes of Blackstone and Oaktree to acquire assets in the future.
Given that it already operates three casinos in NSW and Queensland, Star said it is confident in its ability to gain regulatory approvals for such a merger due to its existing relationships with governments and regulators and its proven track record of governance and compliance.
The Star looks forward to working with Crown to develop the Indicative Proposal, noting it believes it can complete its necessary due diligence and agree binding merger and definitive debt financing documentation over the course of the next eight to twelve weeks, the company said.
In s statement of its own on the proposal, Crown noted that should Stars cash alternative proposal be fully taken up, it would result in pro forma ownership of the merged entity of 59% for Crown shareholders and 41% for Star shareholders. The Board of the merged entity would initially comprise the current Directors of each of Crown and Star.
Crown said it has not yet formed a view on the merits of the proposal and will commence an assessment process on its merits.