June 13, 2024

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Star confirms interest over potential Hard Rock investment

5 min read

Star Entertainment has confirmed it has received “inbound interest” from several parties over possible investment in the group, including a consortium featuring a regional entity of Hard Rock International.

Reports emerged earlier today (20 May) that Hard Rock was part of a group seeking to invest in Star. News broke in the Australian Financial Review and has also been reported elsewhere.

Reports suggest all Star land-based casinos would rebrand all under the Hard Rock name. It is also reported that each site would become less reliant on casino revenue and focus more on other aspects such as live music and hotels.

Star shares initially jumped more than 21.0% when the news broke just before midday local time in Sydney, Australia. Shares are currently trading 19.5% higher than today’s opening price.

Issuing an initial response, Star said it had received “inbound interest” from several external parties over potential transactions. It added that the nature of this interest is unsolicited, preliminary and non-binding, with no approach resulting in substantive discussions.

Star acknowledges Hard Rock interest

However, not long after, it issued another response, directly referencing Hard Rock. Star said it had not received a proposal directly from Hard Rock, but again confirmed interest from some parties, including one consortium featuring the Hard Rock Hotels & Resorts Pacific regional division of Hard Rock.

“The company has received inbound interest from a number of other external parties regarding potential transactions including a consortium of investors which includes the entity Hard Rock Hotels & Resorts Pacific, which Star understands is a local partner of Hard Rock,” Star said.

“The nature of the interest to date has been confidential, unsolicited, preliminary and non-binding. At this stage, none of the approaches has resulted in substantive discussions.

“Star remains focused on its remediation activities in New South Wales and Queensland and participating in the Bell Two Inquiry. Star will keep shareholders informed in accordance with its continuous disclosure obligations.”

The trials and tribulations of Star

The investment approach comes at a somewhat uncertain time for Star. The group currently finds itself the subject of yet another inquiry over its activities.

As referenced by Star in its response to the media reports, the Second Bell inquiry launched in February. This is focusing on Star’s activities in New South Wales (NSW) and fallout of the first Bell report. 

One year after the first inquiry completed, a report into Star Sydney’s progress found the casino had implemented 22 of 30 recommended measures from the Bell report.

There is also an additional focus on the culture at Star. This covers risk management culture and Star’s management and reporting lines. In addition, the inquiry is examining whether Star has been able to obtain the financial resources needed to support The Star Casino.

Some relief with Queensland licence suspension extension

Alongside this, Star faces possible regulatory action in Queensland. Star was sanctioned in the state in December 2022 over a series of failings. The group was fined AU$100.0m (£52.8m/€61.6m/US$67.1m) and informed its licence would be suspended.

This came after an investigation into operations at Star Gold Coast and Treasury Brisbane. The inquiry ruled Star was found “unsuitable” to hold a licence in Queensland.

Primary issues include Star’s “concerted effort” to deliberately mislead banks and regulators on the purpose of China UnionPay transactions. Star also sought out individuals linked to criminal organisations and encouraged them to gamble. 

Other issues include social responsibility failings and deficiencies on anti-money laundering and combating terrorism financing practices. In addition, concerns were raised over historic dealings with junket operators.

Initially, Star was given 12 months to resolve issues flagged by investigators and prove it was suitable for a licence. An initial 1 December 2023 deadline was pushed back to 31 May this year after Star submitted a draft remediation plan to address issues.

Last week, this deadline was extended again to 20 December this year. This is due to the authorities in Queensland wanting to see the results of the second Bell Inquiry before making a decision on Star’s licence. 

What else is going on at Star?

As it regulatory uncertainty is not enough, Star has also seen several senior staff leave the group in recent months.

These include group CEO and managing Robbie Cooke, whose departure was confirmed in March. Christina Katsibouba is also exiting as chief financial officer.

Meanwhile, Jessica Mellor is stepping down as CEO of Star Gold Coast and David Foster as executive chair. Foster had taken on additional duties following Cooke’s exit as CEO.

In addition, Star last month  also published a trading update for Q3, with this showing a net loss of $6.8m. This, however, was an improvement on the $49.7m loss posted in Q3 of the previous year.

Q3 revenue was also down 4.6% to €419.2m, while normalised EBITDA fell 11.5% to $37.9m.

Hard Rock making moves

As for Hard Rock, the group has seen some level of movement in recent weeks and months.

Arguably the biggest news out of Hard Rock in recent times is its Hard Rock Digital business striking a deal to acquire certain US-facing B2C assets from 888.

Details of which assets Hard Rock will purchase have not been disclosed. However, 888 says it expects to the deal to complete in phases and finalise the sale by Q4 this year. The sale agreement came just weeks after 888 launched the strategic review.

Meanwhile, last week, Hard Rock revealed it will shut down The Mirage Hotel & Casino on 17 July for renovations. The group intends to develop a new integrated resort featuring a 700ft version of its iconic guitar-shaped hotel tower.

The final day for hotel occupancy at the iconic Las Vegas venue will be 14 July. Hotel and show reservations beyond this date will automatically be cancelled and refunded.

Hard Rock took over the property in 2022. Owned by Florida’s Seminole tribe, the complex is the first operated by a tribe on the Strip.

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