This follows confirmation that the latter is proposing a $12 billion merger to create a gambling and hospitality giant.
What was announced?
This morning Star Entertainment confirmed that it has submitted a conditional, non-binding, indicative proposal to merge with Crown at a nil-premium share exchange ratio of 2.68 Star shares per Crown share.
Based on recent trading values of Star and the substantial value that would be unlocked by a merger, the company estimates that its pro forma share price is more than $5.00 per share. This implies potential value of the scrip consideration in excess of $14.00 per Crown share.
This is a 15.5% premium to the current Crown share price of $12.12.
In addition to this, Star’s indicative proposal includes a cash alternative of $12.50 per Crown share for up to 25% of its issued share capital.
Star revealed that it believes that a merger with Crown represents a compelling value proposition for all shareholders for a number of reasons.
One of those is that it represents a highly accretive transaction for both Star and Crown shareholders. Management notes that it would create a national tourism and entertainment leader with a world-class portfolio of integrated resorts.
It would also have enhanced scale and geographic earnings diversification, significant balance sheet strength, and free cashflow generation to accelerate debt repayment, support attractive fully franked dividends and pursue continued investment.
Star estimates that the merger could deliver between $150 million to $200 million of cost synergies per annum with an estimated net value of $2 billion. Furthermore, it could unlock significant value from a sale and leaseback of the enlarged property portfolio.
Finally, it believes it would provide access to exciting growth opportunities only available through the merger across marketing and events, digital and technology initiatives, investment in online capabilities and optimisation of a combined loyalty program to deliver enhanced value for members.
“A compelling investment proposition”
Star’s Chairman, John O’Neill AO, said: “A merger of The Star and Crown would result in significant scale and diversification and unlock an estimated $2 billion in net value from synergies. With a portfolio of world-class properties across four States in Australia’s 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.”
The Crown Board has responded to the news, advising that it has not yet formed a view on the merits of the merger proposal.
It will now commence a process to assess the proposal, having regard to the value and terms of the proposal and other considerations. It will also engage with relevant stakeholders including regulatory authorities.
Takeover offer increased
That won’t be the only thing the Crown Board has to consider.
This morning it revealed that Blackstone has increased its takeover offer to $12.35 cash per share. This represents an increase of $0.50 cash per share (or 4%) compared to the previous indicative offer price of $11.85 cash per share.
Once again, the indicative offer price will be reduced by the value of any dividends or distributions declared or paid by Crown.