Australia-China tensions don’t concern Star CEO
China’s decision to “indefinitely” suspend all activity under the China-Australia Strategic Economic Dialogue could provide a significant obstacle to the return of VIP players to Australian casinos.
Market Screener reports that Star Entertainment chief executive officer Matt Bekier said he isn’t too concerned about the latest geopolitical development between the two nations.
“I’m probably a bit more optimistic that people will do what they’ll do,” Mr Bekier said.
“That’s not to say that there won’t be a number of months of challenges in the government relations,” he said.
China’s National Development and Reform Commission said in a short statement that recently, some of the Australian Commonwealth Government officials launched a series of measures to disrupt the normal exchanges and cooperation between China and Australia.
The commission did not say in the statement what specific actions prompted the action.
Bilateral ties between the two countries were first strained in 2018 when Australia became the first company to publicly ban Chinese tech giant Huawei from its 5G network.
Relations worsened in 2020 when Australia called for an independent investigation into the origins of the novel coronavirus.
Australian Trade Minister Dan Tehan said the commission’s decision was disappointing, because the economic dialogue was “an important forum for Australia and China to work through issues relevant to our economic relationship.”
“We remain open to holding the dialogue and engaging at the ministerial level,” he said.
While Star deals with issues out of its control, the struggles of its Sydney cross town competitor, Crown Barangaroo, hasn’t gone unnoticed.
One of Star’s major shareholders, Wilson Asset Management’s John Ayoub, spoke in March about the potential for a Crown-Star merger and what it would mean for Star.
“In a perfect world, you would have Star as the owner and operator of the assets and private equity firm Blackstone as the owner and beneficiary of property assets,” Mr Ayoub said.
Crown has real money casinos in Melbourne and Perth, while its new $2.2 billion Sydney development’s casino has not yet opened, as Crown works with the New South Wales Independent Liquor and Gaming Authority to address issues identified in the explosive Bergin report.
Investors and analysts believed that when Blackstone made a $11.85 a share offer for Crown in April, it was an intentional low ball over, to try and agitate for a second investor, potentially Star.
Since, Blackstone has amended its offer in order to make it more attractive to Crown.
JP Morgan analyst Don Carducci said the timing of Blackstone’s bid appeared “puzzling” unless it was designed to smoke out Star.
He estimated Star could earn up to $110 million a year running Crown’s properties on Blackstone’s behalf.
“This provides Star with a significant value-creation opportunity without having to independently bid for Crown,” he said.
Mr Carducci added that the probity approval, which is expected to take at least a year for Blackstone, could also be completed quicker with Star as the operator, given it is already cleared to operate in NSW and Queensland.
One shareholder, who asked not to be named so they could speak freely, said Star could not afford the $8 billion-plus needed to buy its rival outright, and that Crown’s shareholders, including 37 per cent owner James Packer, would want a cash payout rather than the scrip Star would offer in a merger.
