In a transformative move, Star Entertainment Group is set to hand over the reins to Bally’s Corporation following a $300 million acquisition deal. This agreement promises to secure the Australian casino operator from looming financial peril.

A strategic rescue operation:

The board of Star Entertainment, under the leadership of Chairwoman Anne Ward, along with its lenders, endorsed the deal over the recent weekend. Although the completion of the necessary paperwork was still underway late Monday April 7, formal approvals from the lender’s committee are pending. This agreement, which could be finalized as early as the same day, is poised to stabilize Star’s financial situation significantly.

Bally’s Corporation plans to infuse approximately $250 million into Star, while Bruce Mathieson, Star’s principal shareholder, is set to contribute an additional $50 million. This financial injection is critical as it enables Star to fulfill its immediate financial obligations.

The arrangement includes issuing convertible notes, a strategy complicated by strict probity checks required by regulators in NSW and Queensland. This deal is expected to conclude one of the most tumultuous chapters in Star’s history, marked by financial challenges and regulatory scrutiny.

Since his appointment in July last year, Star’s CEO Steve McCann, has been navigating a financial storm spurred by unforeseen expenses at its new Queens Wharf entertainment precinct in Brisbane. According to Australian Financial Review (AFR), despite securing an additional $100 million loan in September, stringent conditions left the company under renewed financial strain.

Divestments and future plans:

In a separate but related development, Star is offloading its 50% interest in the Queens Wharf precinct to its partners, Chow Tai Fook Enterprises and Far East Consortium. This $50 million deal will lighten Star’s financial burdens while ensuring its operational presence in the casino for at least another year.

The deal with Bally’s, once finalized, will fortify Star’s portfolio, which has been weighed down by legal challenges and a sharp decline in revenues due to decreased patronage from international high rollers.

Bally’s Corporation, headquartered in Rhode Island, manages 19 casinos across the United States and boasts a robust portfolio, including a horse racetrack in Colorado and significant online sports betting operations across North America. The acquisition of Star represents a strategic expansion of Bally’s growing international presence, which includes recent acquisitions such as Aspers Casino in Newcastle, UK.

Soo Kim, Bally’s Chairman and a notable figure in the investment realm through his work with Standard General, has been pivotal in crafting this deal. Known for taking on distressed assets, Kim views the acquisition of Star as an opportunity to leverage Bally’s expertise in revitalizing underperforming casino assets.

This deal, however, hinges on the approval from regulators and shareholders, given the complexities involved in transferring majority control to a foreign entity. Australian regulators have historically been cautious about foreign ownership of domestic gaming operations, making the forthcoming approval process crucial for the deal’s success.