Star Entertainment Group has withdrawn a proposal to merge with fellow Australian casino operator Crown Resorts in the wake of calls this week for Victorias Royal Commission to find Crown unsuitable to retain its state casino license.
In a Friday morning filing, Star said there had been limited engagement with Crown since first putting forward its proposal on 10 May and that issues raised at Victorias Royal Commission into Crown Melbourne have the potential to materially impact the value of Crown, including whether it retains the license to operate its Melbourne casino or the conditions under which its license is retained.
Star said it was open to revisiting a merger or other value enhancing opportunities with Crown in the future but would closely monitor the Royal Commissions currently underway in both Victoria, home of Crown Melbourne, and Western Australia, home of Crown Perth.
Star, which owns and operates The Star Sydney, The Star Gold Coast and Treasury Brisbane, and is developing the AU$3.5 billion (US$2.6 billion) Queens Wharf development in Brisbane, had stated its belief that merging the two companies would create cost synergies of between AU$150 million and AU$200 million (US$111 million and US$148 million) annually.
A merger of The Star and Crown would result in significant scale and diversification and unlock an estimated AU$2 billion (US$1.5 billion) in net value from synergies, said Star Chairman John ONeill in May.
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.
Crown appears to be facing an uphill battle to keep its Melbourne casino license with Counsel Assisting the Royal Commission this week asking for a finding of unsuitability on public interest grounds and due to breaches of Victorias Casino Control Act.