The Star will give Bally’s a 56.7 per cent stake in the business in return for the $300 million in cash. The first $100 million is expected to be paid to The Star by tomorrow.
The Star’s current market cap on the stock market is $315 million, meaning the deal’s value is just shy of the company’s total value before it was suspended from the ASX for its failure to lodge its financial results more than a month ago.
In the announcement of the deal late yesterday, The Star valued the shares to be handed over to Bally’s at 8c each, a reduction on the 11c the shares last traded for in February.
The Star said yesterday it was also in discussions with its largest existing shareholder, Bruce Mathieson and Investment Holdings, to provide $100 million in cash, which would reduce Bally’s financial commitment to $200 million.
In a difficult start to the year, The Star has been warning of its liquidity issues posing a threat to its existence since January.
It has made several deals since then to better its financial position, including selling its Event Centre in Sydney to Foundation Theatres for $60 million and exiting the $3.6 billion Queen’s Wharf development in Brisbane, in which it had a 50 per cent share and had opened a casino, hotel and multiple dining and event spaces just last August.
In exchange for handing over its Queen’s Wharf stake to its two fellow precinct investors, Chow Tai Fook Enterprises and Far East Consortium, it will receive $53 million in cash and full ownership of The Star Gold Coast, in which Chow Tai Fook Enterprises and Far East Consortium were also co-investors.
Its Brisbane departure also absolved The Star of having to pay anything more to the Queen’s Wharf development, which is not yet complete. The Star had been expecting to pay $212 million more towards the precinct.
The Star’s deal with Bally’s comes after the US company proposed a slightly different arrangement in early March. At the time, The Star was in discussions with Salter Brothers over a $940 million refinancing deal which subsequently fell apart.
With the withdrawal of the Salter Brothers proposal announced only a week ago, the Bally’s deal appears to have come together rapidly.
The agreement is still subject to a shareholder vote and regulatory approval.
