Star Entertainment Group Ltd (ASX: SGR) shares are steady at 14 cents on Friday.
Meanwhile, the S&P/ASX All Ordinaries Index (ASX: XAO) is down 0.39%.
Star investors have until 10am Monday to lodge their vote on the proposed takeover by US casino giant Bally's Corporation.
The official vote will take place at the General Meeting next Wednesday. Those who cannot attend must lodge their vote beforehand.
Star Entertainment will conduct the meeting at The Star Event Centre in Sydney.
The takeover has been described as the "only lifeline" left for the casino operator by corporate advisor Grant Samuel & Associates.
Grant Samuels was commissioned as the independent expert to examine the takeover terms on behalf of Star's shareholders.
The law requires an independent report on all takeover proposals to help investors decide how they want to vote.
Grant Samuels determined that the takeover terms were "not fair", but ultimately the "only lifeline" left for Star Entertainment.
The proposal involves a $200 million investment from Bally's and a $100 million investment 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% stake in Star Entertainment shares and control of the company.
The full conversion would give Star's biggest shareholder, the Mathieson family's Investment Holdings, a 37.33% stake.
As required by law, Star Entertainment has provided a list of reasons to vote for and against the proposal.
Here is a summary.
Image source: Getty Images
Why vote yes?
The key reason is to keep the company afloat.
Star Entertainment said:
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.
The case for voting no
Star Entertainment listed the reasons why shareholders may want to vote no.
Among them was the dilution of individual shareholdings and voting power. This is because a huge number of new Star Entertainment shares may be issued to Bally's and Investment Holdings upon conversion of the notes.
Also, ordinary investors are not entitled to participate in the $300 million investment.
The takeover will give control to Bally's and Investment Holdings without a 'control premium' being paid to ordinary shareholders.
Star Entertainment listed "several other important factors" investors should consider when deciding how they'd like to vote.
The company outlines these factors in section 3 of the explanatory memorandum it has sent to investors.
