Star CEO likens casino merger to mining magnate
A proposed merger between Australia’s two largest casino operators has been likened to “the BHP of gaming and hospitality”.
The Australian Financial Review reports that comparison to the mining giant would allow the group to compete globally for the next 20 years, according to Star Entertainment Group chief executive Matt Bekier.
The Star confirmed its merger offer last Monday morning, just minutes after rival bidder, US investment giant Blackstone, increased its offer for Crown to $8.3 billion or $12.35 a share.
The prospect of a bidding war sent Crown shares up 7.26 per cent on Monday to a near two-year high of $13.
The casino group also named former Lendlease boss Steve McCann as its new chief executive.
Crown stock has risen 28 per cent since a NSW government inquiry declared on February 9 that the gaming giant was unfit to hold its Sydney casino licence.
Mr Bekier said the tilt at Crown was about creating an Australian tourism giant with a network of world-class assets across the country that would be attractive to visitors from around the world.
The Star’s stock rose 7.67 per cent to $4.21.
Merger would create gaming and hospitality company bigger than Qantas
“In terms of the long-term growth, our view here is to kind of create the BHP of gaming and hospitality in Australia,” he said.
“It would create a company that is bigger than Qantas, bigger than a couple of the big four banks. And when COVID lifts and tourism, international tourism comes back, that will position us really well to sell Australia globally. That’s really the long term vision for the company.”
Under the terms of The Star deal, Crown investors, including 37 per cent shareholder James Packer, would receive $12.50 a share for up to 25 per cent of Crown’s share base, with the remainder paid in The Star stock, valued at $10.48, according to terms of the nil-premium merger.
All up, The Star offer is $10.98 a share, which values the deal at $7.4 billion.
But The Star says Crown investors that take stock could eventually find their shares are worth more than $14, in part thanks to the creation of between $150 million and $200 million worth of cost savings a year from the deal.
“I think as an industry we carry too much cost and if you look at it, up to $200 million of cost synergies is pretty substantial for this type of business,” Mr Bekier said, promising that long-suffering Crown shareholders would not have to wait long to see savings flow.
“That also means we can service the local market much more effectively.
“I’d say three-quarters of them are very straightforward. I don’t think this is one of those things where we’ll be saying in five years’ time, where are these synergies? This is something that within 12 months’ time, we’ll be able to point to very significant improvements.”
This would include centralising the business and cutting middle management, but frontline staff would be spared.
“That allows us to take a lot of senior people out of a lot of white collar, middle and senior management. We’ve made a commitment to a number of state governments as well as unions that there will be no frontline job losses. And I can say that with confidence because right now, we are recruiting for 600 frontline staff.”
Mr Bekier said The Star had reached out to Mr Packer’s advisers, Moelis Australia, and would now look to open talks with the Crown board, which is led by executive chairman Helen Coonan.
“We can’t go any further without their engagement,” he said.
“It’s really going to be in the hands of the Crown shareholders to make their views about this matter known to the Crown board.”