Star Scraps $9 Billion Merger Plan With Crown Resorts
(Bloomberg) -- Star Entertainment Group Ltd. scrapped a $9 billion plan to merge with Crown Resorts Ltd. after allegations of tax evasion and lax money-laundering controls aired at a public inquiry put the future of Crown’s flagship Melbourne casino in doubt.
“Substantial benefits could be unlocked by a merger, however the uncertainty surrounding Crown is such that Star is unable to continue at the present time with its proposal,” the company said Friday.
Lawyers for the inquiry this week argued that Crown isn’t fit to run its Melbourne casino, saying the gaming company had failed to address money-laundering risks and concealed the scale of potential tax underpayments. A final report is due by Oct. 15.
Star’s withdrawal as a suitor underscores the damage to Crown from a regulatory assault that’s already closed its brand-new Sydney casino. Star said the loss of Crown’s Melbourne license, or any conditions tied to its continued operation, could materially impact Crown’s value.
Star proposed an all-stock merger with Crown in May to create an Australian gaming and hospitality giant with a market value of A$12 billion ($9 billion).
Crown shares fell as much as 4.2% in early Sydney trading Friday, cutting its market value to A$6.7 billion. The stock has slumped about 25% from its recent peak in May.
Star, which is best known for its casino in Sydney, said it “remains open to exploring potential value enhancing opportunities with Crown,” though engagement with Crown on the merger plan had been “limited.” It said it will closely monitor the outcome of the Melbourne investigation, as well as a concurrent probe into Crown’s Perth casino.
In a separate statement, Crown said it remains “willing to engage” with Star in relation to a potential merger. “The board is committed to maximizing value for all Crown shareholders and will carefully consider any proposal that is consistent with this objective,” it said.
©2021 Bloomberg L.P.