***UPDATE*** Late Sunday, news broke that Star Entertainment has accepted an offer from Bally’s that will see the US-based regional casino operator take majority control of the Australian gaming firm. Bally’s is paying $149.8 million to acquire Star with investor Bruce Mathieson — Star’s largest individual shareholder — providing $30.1 million in financing to move the deal along. Should Star creditors and shareholders approve the deal, it would stave off what had become an increasingly likely collapse of the Australian company.
- Star reportedly wants Bally’s to lift acquisition offer.
- Bally’s still has strong bargaining position as Star faces liquidity crisis.
Star Entertainment Group reportedly wants Bally’s (NYSE: BALY.T) to boost its $158 million takeover offer for the embattled Australian casino operator as it faces yet another liquidity crunch.
It’s rumored that Star is once again running on fumes with its cash burn rate implying it might have just days to live in its current form. The Australian Financial Review reports that Star and Bally’s have been engaged in back-and-forth regarding the latter’s efforts to acquire 50.1% of the former.
That report also indicates Star is mulling the sale of 15% of its shares, trading in which has suspended for more than a month, in a transaction that doesn’t need investor approval. Should that sale materialize, it could provide the casino operator with the cash needed to extended its survival timeline while possibly valuing it at $189 million.
When Bally’s initially floated its takeover offer for Star about a month ago, the Rhode Island-based regional casino operator signaled it was open to negotiations. As of yet, it hasn’t publicly commented on the possibility of raising its offer.
Bally’s Holds Strong Cards
At the bargaining table with Star, Bally’s comes from a position of strength. Last week, a financing offer by Salter Brothers Capital to potentially keep Star afloat was withdrawn, perhaps putting Star into a beggars can’t be choosers.
Additionally, the offer floated by Bally’s is viewed by some Star investors as preferable to selling the Star Brisbane to Hong Kong-based Chow Tai Fook and Far East Consortium for a mere $31 million. Under the terms of the Bally’s bid, Star would maintain control of its Australian integrated resorts.
That’s likely among the reasons why Bruce Mathieson, the Australian businessman who’s the largest individual investor in Star Entertainment, recently endorsed the Bally’s offer sheet. His preference for Star accepting the US operator’s proposal became public prior to news of the Salter Brothers financing being yanked hit the wires.
It’s rumored that if Star accepts the Bally’s offer, the buyer would allow Mathieson to increase his equity position in the company at favorable terms while also granting him board seats. There’s also chatter that Mathieson could provide financing to assist Bally’s getting the deal done.
Still Work to Be Done for Bally’s in Pursuit of Star
It’s sturdy bargaining position aside, Bally’s still has boxes to check in its effort to acquire Star. Obviously, the target needs to accept an offer — the original one or increased version — and that acceptance moving forward is predicated on creditors and shareholders voting in favor of it.
Star may no choice but to play ball with Bally’s. Speculation has surfaced that talks regarding the sale of the Queens Wharf assets have hit a snag and the company has yet to receive cash from a previously announced sale of its Sydney convention and meeting space.
Bottom line: Star’s near-term choices could well prove to be accepting Bally’s proposal or risk outright collapse.
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