The biggest single investor in Star Entertainment Group Ltd (ASX: SGR) shares will kick in $100 million to help save the casino group.
After the market close yesterday, Star Entertainment announced that the Mathieson family, via its company Investment Holdings Pty Ltd, will subscribe for $100 million of a proposed $300 million investment into the ASX group by US casino giant Bally's Corporation (NYSE: BALY).
In its statement, Star Entertainment said:
The Company has now entered into a commitment letter with Investment Holdings under which Investment Holdings will subscribe for $100 million of the Investment.
As a result, the investment from Bally's will reduce to $200 million. The aggregate principal value of the Transaction remains at $300 million.
Bally's had previously offered to take over Star Entertainment for $300 million on its own.
Star Entertainment and Bally's announced a binding term sheet on Monday for a multi-tranche convertible notes and subordinated debt arrangement.
However, Bally's welcomed the possibility of the Mathieson family subscribing for up to $100 million of the $300 million total investment.
The deal will give Bally's a 56.7% controlling stake in Star Entertainment, which will now be shared with the Mathieson family.
What's next for this ASX casino group?
The Australian Financial Review (AFR) reports that heads will roll at Star Entertainment once Bally's takes control.
The AFR quoted Bally's chair, Soo Kim:
We need to put different executives in there – this particular mix of executives have generated poor operating performance.
Kim said Star Entertainment had been "severely under-managed".
But he added that Star's assets could start making money again "within a reasonable amount of time".
Bruce Mathieson Junior said:
We are ready to go and have always been ready to go.
The hardest part has been dealing with the incumbent board and management.
They are great, irreplaceable assets that obviously have been mismanaged.
We hope to be able to bring some stability, vision and investment with a good, aligned team.
What else is news with Star Entertainment?
Star Entertainment revealed some other news for ASX investors after the market close yesterday.
The company has formally completed its divestment of The Star Sydney Event Centre.
Foundation Theatres bought the space for $60 million.
The balance of the sale proceeds, $58.1 million, will be held in escrow until shareholders vote on the Bally's takeover, probably in June.
The escrow arrangement is at the behest of the NSW Independent Casino Commission (NICC).
Star Entertainment aims to distribute a booklet to ASX shareholders in late May and schedule a vote in late June.
The board intends to unanimously recommend the Bally's proposal to investors.
The takeover will be subject to an independent expert concluding it is in the best interests of investors.
Each board director intends to vote all of the Star Entertainment shares they own or control in favour of the proposal.
The Star Entertainment share price remains frozen at 11 cents for now.
