By Stuart Condie
SYDNEY--The Star Entertainment Group Ltd. withdrew its indicative proposal to merge with Crown Resorts Ltd. over concerns its rival could lose its casino license in Melbourne.
Star on Friday said issues raised by Victoria state's quasi-judicial inquiry into Crown's suitability to hold a license generated too much uncertainty for the proposal to proceed. It also said it had limited engagement with Crown on the proposal.
"Issues raised at Victoria's Royal Commission into Crown Melbourne have the potential to materially impact the value of Crown, including whether it retains the licence to operate its Melbourne casino or the conditions under which its licence is retained," Star said in a statement.
Star said it continued to believe substantial benefits could be unlocked by a merger and that it was open to exploring potential value-enhancing opportunities with Crown. Star estimated that the combined company could reduce annual costs by up to 200 million Australian dollars (US$147.6 million) when it made the proposal in May.
There was additional potential to create significant value from deals such as a sale and leaseback of the combined group's property portfolio, Star said.
Star's proposal was one of three fielded by Crown. In May it rejected an improved A$12.35 per share takeover offer from U.S. private-equity firm Blackstone Group Inc., saying it undervalued the company. Oaktree Capital Management has offered a funding commitment of up to A$3.1 billion to buy back some or all of the 37% stake held by billionaire James Packer's Consolidated Press Holdings.
With Crown mired in allegations of money-laundering and links to organized crime figures, Mr. Packer's CPH agreed in April to neutralize most of its influence over Crown in an effort to quell some regulatory concerns. CPH can't appoint nominees to Crown's board until October 2024 and can't talk to the company about its operations privately.
Crown shares last traded at A$10.25, down more than 20% in the past two months. They have fallen in 13 of the last 14 trading sessions.
Write to Stuart Condie at [email protected]