US casino operator Bally’s Corp has called on the Board of Directors of Australia’s Star Entertainment Group to conduct a “broad-based general review of The Star’s strategic, financial and commercial operations” should its proposal to invest a share of AU$300 million (US$195 million) to help salvage the embattled company be approved by shareholders.
Further details of the proposal were outlined in an Explanatory Memorandum issued to shareholders on Monday ahead of a General Meeting scheduled for 25 June.
The memorandum also revealed that an independent expert tasked with reviewing the investment proposal had found shareholders would be better off if they vote yes than if they do not. The AU$300 million proposal, which includes AU$200 million (US$130 million) from Bally’s and AU$100 million (US$65 million) from local pub baron Bruce Mathieson’s Investment Holdings Pty Ltd, is seen as the final opportunity for Star to stave off insolvency.
According to information contained in the Explanatory Memorandum, Bally’s will expect a review be undertaken to evaluate the performance, profitability and prospects of The Star and its businesses; to identify efficiencies and synergistic opportunities that may be available over time between Bally’s and The Star; and determine the optimal manner of operating and managing The Star’s businesses going forward.
Bally’s, which is to be issued convertible notes that can be converted into a 38% stake in Star, added that it does not intend to to redeploy the fixed assets of The Star, or to transfer assets between Star and Bally’s, should its proposal win shareholder approval.
“Bally’s expects that, if the Strategic Investments Resolutions are passed and the Board engages in the review described above, Bally’s will be able to assist The Star in implementing a turnaround that preserves The Star’s long-term potential, including for employees,” it said.
Star, meanwhile, said that it had appointed an independent expert, named as Grant Samuel, to report on whether the Strategic Investments and the consequence of passing the Strategic Investments Resolutions are fair and reasonable for shareholders.
It added that Samuel’s report has concluded that “there are compelling reasons for non-associated shareholders of The Star to approve each of the [Strategic Investments]. They will clearly be better off if the [Strategic Investments] proceed than if they do not. Accordingly, each of the [Strategic Investments] are reasonable having regard to the interests of the non-associated shareholders of The Star.”
Samuel added that while the terms of each of the Strategic Investments by Bally’s and Investment Holdings are “not fair … the methodology required for this analysis under regulatory policy is, at best, theoretical and should not be the primary basis on which to judge the merits of the [Strategic Investments].”
In outlining the intentions of Bally’s, Star said the US firm “intends to bring its track record of revitalizing underperforming casino businesses, operating expertise and credibility and experience with regulated gaming businesses across multiple jurisdictions.
“Bally’s intends to partner with The Star in executing successful turnaround of The Star’s business and operations and enhancing its reputation with regulators and other stakeholders in Australia. Bally’s strategic rationale for its Strategic Investment is a desire to preserve The Star’s long-term potential to deliver a more resilient and sustainable business for shareholders and all other stakeholders.”
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