The Star Entertainment Group has proposed a conditional, non-binding, indicative merger with Crown Resorts. It will offer 2.68 of its own shares for each Crown share. The merger will result in a company worth AU$12 billion (US$9.4 billion).
The Star reports that its shares are worth around AU$5, which amounts to AU$14 per Crown share. A cash alternative of AU$12.50 per Crown share is also available, subject to a cap equal to 25% of Crown’s total shares on issue.
The merger plan would result in pro forma ownership of 59 percent for Crown shareholders and 41 percent for Star shareholders, with directors from both companies serving on the board.
With an estimated net value of AU$2 billion, the merged entity would aim to deliver cost synergies of between AU$150 million and AU$200 million per year.
“A merger of The Star and Crown will result in substantial size and diversification. It would also amount an estimated $2 billion in net value from synergies,” said John O’Neill, chairman of The Star.
According to The Star, the merged group will have a broader range of goods for domestic and foreign customers. Also, It will “unlock tremendous value from a sale and leaseback of the enlarged property portfolio.”
According to Crown’s announcement, the operator is still considering the benefits of the merger proposal. It added, “It will now begin a process to assess the merger proposal, having regard to the proposal’s value and terms.”
Crown is also considering other merger offers, including one from Blackstone Group. It must consider itself extremely fortunate to have received so many, given its recent regulatory failures.