Star Entertainment Group Ltd (ASX: SGR) shares are down 2.61% to 11 cents as investors begin contemplating their vote on the takeover.
The casino operator issued a Notice of General Meeting earlier this week and announced the vote would take place on 25 June.
Shareholders who are unable to attend the meeting at The Star Event Centre in Sydney may lodge a voting form by 10am on 23 June.
The meeting notice included the independent expert's report on the takeover proposal from US casino giant Bally's Corporation.
The proposal involves two strategic investments: $200 million from Bally's and $100 million from Star's biggest single shareholder.
The investment will involve the issuance of convertible notes and subordinated debt instruments.
The full conversion of the notes would give Bally's a 53.75% controlling stake in Star Entertainment.
A full conversion would give Star's biggest shareholder, the Mathieson family's Investment Holdings company, a 37.33% stake.
An independent report is required by law for all takeover proposals to help investors decide how to vote.
The independent expert, Grant Samuel & Associates, determined that the terms were "not fair" but ultimately the "only lifeline" left for Star.
Also as required by law, Star Entertainment has laid out the reasons to vote for the proposal, and the reasons to vote against it.
These are the 12 things Star Entertainment shares investors need to weigh up before deciding yea or nay.
Let's take a look.
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Star Entertainment shares investors consider reasons to vote yes
The Star Entertainment board has unanimously recommended the takeover proposal to shares investors.
Star Entertainment outlined the key reason to vote yes as follows:
The Strategic Investments by each of Bally's and Investment Holdings provide cash funding and assist The Star to continue as a going concern and avoid other consequences, such as voluntary administration, which may not be in the best interests of The Star's Shareholders.
Star Entertainment said there were other reasons to vote yes, namely:
There has been no alternative source of additional funding for a similar quantum available to The Star that has been capable of being implemented.
The Subordinated Debt Instrument already provided to The Star as part of Tranche 1 would otherwise be required to be repaid which would represent an additional funding requirement.
The $58 million proceeds held in escrow following the divestment of The Star Event Centre sale will be released to The Star if Shareholder approval is obtained for the Strategic Investment from Bally's.
The Star has the potential to benefit from the combined financial contribution, experience and expertise of each of Bally's and Investment Holdings.
The Strategic Investments are compatible with the existing arrangements with the lenders under The Star's Senior Facility.
There is an ability for interest payments on the Convertible Notes and Subordinated Debt Instrument to be capitalised which assists in preserving The Star's available cash.
The Independent Expert has concluded that each of the Strategic Investments are reasonable having regard to the interests of the non-Associated Shareholders of The Star.
Here are the reasons to vote no
Star Entertainment outlined the reasons to vote no as follows:
Your percentage shareholding and Voting Power in The Star will be diluted as a significant number of new Shares may be issued to Bally's and Investment Holdings upon conversion of the Convertible Notes and you are not entitled to participate in the Strategic Investments.
Notwithstanding Bally's and Investment Holdings may, in aggregate, acquire more than 50% of The Star's Shares on issue, and as a result there may be a change in the majority composition of the Board, no 'control premium' is being paid to non-Associated Shareholders.
Bally's and Investment Holdings will likely have significant influence over The Star.
You may not agree with the recommendation by the Directors and the opinion of the Independent Expert.
The company said there were "several other important factors" that investors should take into account before deciding how to vote.
Star sets out these factors in section 3 of the explanatory memorandum it sent to investors this week.
