Star Entertainment has accepted a fresh AU$300 million (US$ 18 million) rescue offer from Bally’s Corporation, after talks for a larger refinancing plan collapsed. With no other bidders remaining, Star had few options left.
Bally’s had already shown interest in Star earlier this year. The US-based casino group officially made its offer on March 10. Star confirmed the deal in a filing with the ASX on Monday.
The first part of the deal involves an AU$100 million injection from Bally’s, which will be delivered by Wednesday. Star will not need shareholder approval for this payment. In return, Bally’s gets about 15 percent of Star’s shares and AU$66.6 million in subordinated non-convertible debt.
The second part of the offer, worth AU$200 million, depends on shareholder and regulatory approvals. It may be split into two payments of AU$100 million each. These must be completed by October 7 if final approvals are delayed.
Altogether, Bally’s could end up owning as much as 56.7 percent of Star’s shares. That’s higher than the 50.1 percent mentioned in its original bid. The notes tied to the deal come with a 9 percent interest rate and mature in July 2029. Bally’s is buying shares at 8 cents each, even though Star’s last price before trading halted was 11 cents.
Trading of Star’s shares has been suspended for over a month due to a delay in its financial reporting.
Star plans to call a shareholder meeting in June. The company said its board plans to “unanimously recommend” that shareholders vote in favor of the deal.
Soo Kim, chairman of Bally’s, said the move gives his company a way to help Star recover.
“This transaction provides Bally’s the opportunity to infuse The Star with what it needs to regain its position as Australia’s preeminent gaming destination,” Kim said. “And it allows The Star shareholders to share in what we confidently believe will be a brighter future together.”
George Papanier, president of Bally’s, said the company is bringing its experience to the table. “We’re excited to bring our reputation and operating expertise” to the Australian market, he said. Bally’s already runs 19 casinos in 11 US states and recently acquired a casino in Newcastle, UK.
There’s also a chance that Bruce Mathieson, Star’s largest individual shareholder, might help fund the deal. He had earlier backed the Bally’s plan when it was smaller, offering AU$50 million at the time.
Now, Star says it’s in talks with Mathieson for a possible AU$100 million contribution. If he agrees, Bally’s could lower its own input to AU$200 million. The terms allow for adjustments depending on how much Mathieson invests.
Mathieson holds a 10 percent stake in Star and has signaled that he has the green light to raise it. Whether he puts in the money or not, both he and Kim will take board observer roles as part of the agreement.
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