Australia's Star Entertainment pulls $6.6 bln bid for Crown Resorts
- Star cites uncertainty over Crown's Melbourne casino licence
- Says it has had limited engagement with Crown so far
- Crown faces two inquiries that could affect Melbourne, Perth casinos
July 23 (Reuters) - Australian casino operator Star Entertainment Group (SGR.AX) on Friday withdrew a A$9 billion ($6.6 billion) buyout proposal for rival Crown Resorts Ltd (CWN.AX) after an inquiry heard the target should lose its main licence, sending its shares lower.
Star, the country's No. 2 casino operator, said it may yet consider a tie-up with the troubled larger company, but was concerned about the impact of an inquiry on its value "including whether it retains the licence to operate its Melbourne casino or the conditions under which its licence is retained."
The decision removes a lifeline for Crown which has been trying to convince regulators it can rebuild its culture after an earlier inquiry in February found it allowed money laundering on its premises for years and declared the company unfit to open a just-built casino in Sydney. read more
That inquiry, along with venue closures due to COVID-19 lockdowns around the country, had put downward pressure on Crown's shares, sparking at least two takeover approaches for the company in which billionaire James Packer has a 37% stake.
A subsequent inquiry was told this week Crown should also be stripped of its gambling licence for the Melbourne resort, whose casino generates about three quarters of its profit, due to insufficient efforts to reform its culture. read more
Crown shares fell up to 4% in early trading on Friday, against a broader market (.AXJO) decline of 0.25%, taking its value to levels before the merger and acquisition approaches began in March.
"I think it was more the price Star wanted to back away from," said Nathan Bell, portfolio manager of Intelligent Investor, which has shares in both companies. "It may still be a bidder yet, as I'm sure the regulators would prefer a local operator to own our casino licenses."
Goldman Sachs analysts said in a research note that Star's decision to pull the indicative offer was unsurprising and that it may ultimately benefit from restrictions placed on its rival.
Star shares rose up to 1%.
Crown said in a statement it remains willing to engage with Star, and will continue to consider any proposal it receives.
Crown rejected a lower-priced proposal from buyout giant Blackstone Group (BX.N) in May, leaving Star's approach as its main option to show regulators it could overhaul itself under new ownership.
Crown does have another option on the table, with Oaktree Capital Group (OAK_pa.N)submitting in April a proposal to bankroll a A$3 billion buyback of Packer's stake.
If the proposal materialises, it would remove a regulatory concern, which was Packer's influence over the board and its decision making.
($1 = 1.3548 Australian dollars)
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