The Star Entertainment Group has announced it has submitted a conditional, non–binding, indicative proposal to merge with Crown Resorts at a nil–premium share exchange ratio of 2.68 The Star shares per Crown share (Indicative Proposal).
Based on recent trading values of The Star and the substantial value that would be unlocked by a merger, The Star estimates its pro forma share price to be more than $5 per share implying potential value of the Scrip Consideration in excess of $14 per Crown share. The Indicative Proposal also includes a cash alternative of $12.50 per Crown share for up to 25% of Crown’s issued share capital (with any scale back to occur on a pro rata basis) (Cash Alternative). Crown shareholders that accept the scrip consideration may qualify for capital gains tax rollover relief.
The Star believes that a merger with Crown represents a compelling value proposition for all shareholders for the following reasons:
- A merger represents a highly accretive transaction for both The Star and Crown shareholders;
- It would create a national tourism and entertainment leader with a world–class portfolio of integrated resorts with enhanced scale and geographic earnings diversification, significant balance sheet strength and free cashflow generation to accelerate debt repayment, support attractive fully franked dividends and pursue continued investment;
- It is expected to deliver between $150 million to $200 million of cost synergies per annum with an estimated net value of $2 billion;
- It could unlock significant value from a sale and leaseback of the enlarged property portfolio (or via a similar structure and subject to the receipt of necessary regulatory consents);
- It would support an enhanced range of products and experiences for domestic and international guests across the portfolio of integrated resorts; and
- It would provide access to exciting growth opportunities only available through the merger across marketing and events, digital and technology initiatives, investment in online capabilities and optimisation of a combined loyalty program to deliver enhanced value for members.
The Star’s Chairman, Mr John O’Neill AO, said that bringing together The Star and Crown would create an estimated$12 billion ASX–listed national tourism and entertainment leader.
“A merger of The Star and Crown would result insignificant scale and diversification and unlock an estimated$2 billion in net value from synergies. With a portfolio of world–class properties across four States in Australia’s most attractive and populated catchment areas and tourism hubs, the combined group would be a compelling investment proposition and one of the largest and most attractive integrated resort operators in the Asia Pacific region.”
