Tantamount to the raising of Lazarus, battle fatigued Star Entertainment (ASX: SGR) has again thrown shareholders yet another morsel of renewed hope with revelations the casino operator has accepted a $250-$300 million buyout offer from US-based Bally’s Corp.
Whether this latest deal saves Star from financial collapse remains to be seen.
But the deal hatched last night will see convertible notes issued at a conversion price of 8 cents per share. However, part of the agreement is complicated by probity requirements from NSW and Queensland regulators.
Bally’s will end up take a majority stake (56.7%) in Star.
While the deal will see Bally’s stump up with between $50-$100 million tomorrow, the remainder of the rescue package will have to wait until after a shareholder vote.
The deal also includes arrangement where Star’s largest shareholder, pub billionaire Bruce Mathison, could potentially invest between $50-$100 million, which would reduce Bally’s investment accordingly.
Meanwhile, in the absence of a better deal, and in light of the casino’s checkered deal making history, Star’s board has little choice than to recommend shareholders give the proposed buyout the big thumbs up.
Assuming they do, today’s deal puts paid to the most turbulent period in Star’s history.
Today’s deal follows the previously announced deal to offload half Star’s stake in debt-riddled Queen’s Wharf integrated resort in Brisbane to Hong Kong join venture partners Chow Tai Fook and Far East Consortium.
It’s understood that the casino inside the precinct is expected to be operated by Star for at least the next year.
Star CEO Steve McCann told the market in January the company had a paltry $79 million in cash, which meant the board could not sign off on its half-year financial accounts.
Due to complications with the NSW government and lenders over asset security, a range of options, including a $750 million lifeline from property investor Salter Brothers and a $250 million loan from U.S. firm King Street Capital Management all fell over.
The company joins a rogues gallery of stocks that have experienced wholesale value discretion over a few short years. Since trading at over $5 a share in December 2016, Star has shed 97% of its value.
Star new majority stakeholder, Bally’s, owns 19 casinos in the U.S., plus numerous other entertainment assets.
While Bally’s initial proposal, sent around a month ago, offered $250 million in exchange for at least a 50.1% stake in Star, it lacked a price or specific terms.
“We are usually the buyer of last resort,” the company’s chairman Soo Kim recently told media.
While the Queens Wharf deal with Bally’s remove major liabilities from Star’s books, the casino operators still faces a multimillion dollar penalty from AUSTRAC for its historical misconduct.
Prior to its trading halt, Star had a market cap of $316 million shares and last traded at 11 cents.
