Merger of Crown and Star would be subject to ACCC inquiry 

Hot off the heels of The Star’s takeover bid for Crown Resorts, the Australian Competitive and Consumer Commission has announced it will hold an inquiry into any merger and its impacts on competition if gambling companies are allowed to merge.

The Guardian reports that ACCC chairman Rod Sims said he would conduct a public review of the merger proposal, which would result in a casino giant with operations in Sydney, Melbourne, Brisbane, Perth and the Gold Coast.

“We will do a detailed investigation. It will be a public review,” Sims said.

“It’s very early days. But we would look at the market for domestic table game customers,” he said.

“We would look at the competition between Barangaroo and Star in Sydney.

“We would also look at the extent to which there is intercity competition for customers.”

Sims said he had not yet had contact with Star, but that he thought it would expect the ACCC to take an interest.

The proposal by Star was announced to the ASX on Monday morning and involves a merger of the two groups to create a single casino operator, which would have operations in most capital cities.

Only the casinos in Adelaide and Tasmania are owned by other groups.

Star would also take control of Crown’s Barangaroo high-roller casino, which is completed but has been prevented from opening after the New South Wales regulator, the Independent Liquor and Gaming Authority, found Crown was no longer suitable to hold a casino licence.

Crown has been negotiating with the regulator over what steps it must take to become suitable.

The casino was potentially a serious threat to Star Sydney.

Star’s offer involves Crown investors being granted 2.68 Star shares.

This does not include any takeover premium and is based on the three-month average price of Crown shares, prior to March 19, when Crown received another takeover offer, from US private equity group Blackstone, causing its share price to jump.

But whether the offer is attractive to Crown’s largest shareholder, James Packer, who holds a controlling 37 per cent, remains to be seen.

Star proposal unlikely to allow Packer to withdraw from casinos altogether

Packer revealed during probity hearings in Sydney that he was suffering from bipolar disorder and had been battling serious mental health issues.

After damning evidence about his role in Crown, Packer made it clear to the regulator that he would no longer seek to take an active management role in the casino empire he created.

He is believed to be wanting to exit Crown altogether.

But the Star offer will pose a dilemma for the billionaire, and it is not just about price.

The offer, which contemplates a cash alternative of $12.50 per Crown share, subject to a cap equal to 25 per cent of Crown’s total shares on issue, would not likely allow him to exit entirely.

It would also see him in business with his fierce rivals.

Star had sought to prevent Crown’s Barangaroo casino being built and at one stage Packer had taken a significant stake in Star, which was then called Echo Entertainment.

Crown, revealing the details to the ASX, said the board of the merged entity would initially comprise the current directors of each of Crown and Star.

Star has stated it estimates that a merger with Crown would result in indicative cost synergies of between $150-200 million per annum.

Star has also indicated there is the potential to unlock significant value from a sale and leaseback of the merged entity’s property portfolio.

Simultaneously, Crown announced it had received an enhanced offer from a company associated with Blackstone, which already holds 10 per cent of Crown.

It has increased its offer by 50 cents a share to an indicative price of $12.35.

The purchase would take place by way of a scheme of arrangement.

The indicative price will be reduced by the value of any dividends or distributions declared or paid by Crown.