Crown Loses Star Entertainment Merger Proposal Due TO RC Findings
Crown Resorts had two big names interested in acquiring its operations across Australia in the first half of 2021. The American hedge fund, the Blackstone Group put in an initial offer and then raised its offer after Crown did not accept the first.
Before Crown could made a decision on the second offer, its rival Star Entertainment sent in a merger proposal that was a lot more attractive than what Blackstone was offering. Crown Resorts turned down the offer from the Blackstone Group and said that it would review and make a decision on the Star Entertainment offer.
The Star Entertainment offer was sent across in May 2021 and Crown Resorts took its time in announcing a final decision.
The delay might have backfired for Crown as Star Entertainment confirmed that it has decided to withdraw its merger in light of the findings of the Victoria Royal Commission regards its Crown Melbourne operations.
The Royal Commission has carried out a detailed investigation into Crown Melbourne after the NSW gaming regulator highlighted multiple and serious gaming breaches which Crown Resorts admitted to. The Royal Commission unearthed even more serious breaches with its Crown Melbourne operations.
Some of these breaches included underreporting its revenue for nearly a decade to the Victorian government and dodging taxes to the tune of $200 million. Crown also admitted to allowing money laundering to take place at its casinos. Crown piled on misery for itself when it decided to send a letter to the Victorian government and indirectly caution them against making a decision to cancel their casino license.
The veiled threat told the Victorian government that cancelling their license would cause 12,000 employees to be out of work and banks would lose millions as Crown would not be able to repay their loans. The Victorian government did not cave in and told the Royal Commission that if they recommended that Crown was not suitable to hold a casino license, they would take their advice and cancel the license.
Star Entertainment Says Merger Too Risky
If the merger between Crown Resorts and Star Entertainment had gone through, it would have created a casino operator worth $12 billion.
Star Entertainment said that given the recent findings by the Royal Commission and the fact that Crown might lose its license in Victoria, it was too risky to its shareholders to continue with the merger.