The Star confirms US casino group Hard Rock has shown interest in striking a deal

The Star confirms US casino group Hard Rock has shown interest in striking a deal

The Star's $3.6 billion Queen's Wharf development. Photo: The Star, via Facebook.

The Star Entertainment Group (ASX: SGR) has confirmed speculation that Hard Rock Hotels and Casinos is seeking to secure a “potential transaction” with the embattled casino operator as the company’s shares continue to trade near record lows amid a second inquiry into its suitability to hold a casino licence in NSW.

Speculation has been rife that a takeover deal may be headed The Star’s way, with the Australian Financial Review earlier suggesting that US-based Hard Rock could be eyeing a recapitalisation plan that would give it control of the Brisbane-based company.

The Star this morning says that it has not received a proposal “directly from Hard Rock”.

“However, 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 The Star understands is a local partner of Hard Rock,” says the company.

“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.”

This morning’s announcement was accompanied by a temporary pause in trading of The Star’s shares, leading to the stock exploding from the blocks as trading resumed.

The Star’s shares rose almost 23 per cent to a high of 55.5c before midday (AEST), up from Friday’s close of 45c. The buying activity has taken the shares to four-week highs following a sell-off to record lows triggered by the second Bell inquiry that began last month to determine the group’s licence suitability in NSW.

“The Star remains focused on its remediation activities in NSW and Queensland and participating in the Bell Two Inquiry,” says the company.

“The Star will keep shareholders informed in accordance with its continuous disclosure obligations.”

While The Star last year raised $800 million to shore up its balance sheet amid rising costs and regulatory penalties, including $200 million in fines from the NSW and Queensland casino regulators, the company has also been under pressure financially to get its house in order in both states so that it may regain control of its casino licences.

Today’s announcement follows the Queensland Government last week saying it is deferring for a second time a suspension of The Star’s Brisbane and Gold Coast casino licences pending an evaluation of the company’s progress towards suitability via a comprehensive 640-point remediation plan.

It also comes on the heels of revelations at the second Bell inquiry that The Star is struggling to implement its remediation plan in a timely manner following the sacking of 500 staff last year.

While the job cuts were expected to save The Star about $100 million a year, the company’s return to profitability has been challenging in the absence of international VIP players which were the primary source of The Star’s regulatory woes concerning its oversight of potential money laundering activities.

The group’s future hinges on the success of its $3.6 billion Queen’s Wharf development in Brisbane which is due to open in August. But even there The Star is facing some heat.

Queen’s Wharf is being developed in partnership with Hong Kong-based Far East Consortium and Chow Tai Fook Enterprises, with the latter declared by the Queensland Government this month as suitable despite its alleged links to organised crime.

But Chow Tai Fook Enterprises last week sought an injunction to prevent Nine Group publications, including the AFR, from publishing any part of a report stemming from an independent inquiry into allegations that it was associated with junket operator Alvin Chau.

Chau was last year sentenced to 18 years' jail after being found guilty by a Macau court on multiple charges, including fraud and illegal gambling.

Meanwhile, at least one shareholder of The Star – billionaire pubs baron Bruce Mathieson - will be pleased with today’s announcement after reaping a gain of about $3.5 million in the past month from a 39.6 million share top-up to his holding. Matheson bought the shares at an average of 46.4c each last month, taking his stake in The Star to 9.59 per cent.

UPDATE: Hard Rock International has since denied that it is part of a consortium planning a takeover of The Star Entertainment Group. Read more here.

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