A top former Victorian gaming regulator has predicted that there is a 70 percent chance that The Star Entertainment Group can see the license suspension period of its Sydney casino extended, while seeing zero chance it will be granted back after the Bell Two inquiry.
On Thursday, The Star informed that the New South Wales Independent Casino Commission (NICC) had received approval to further extend the appointment of the special manager for the property, Nicholas Weeks, until March 31st, 2025, ‘unless terminated earlier by the NICC’.
While this extension does not directly refer to the license itself, it gives a strong indication of the way the NICC is leaning in regards to the leeway it’s giving The Star to improve its remediation efforts, rather than cancel its gaming license.
In an interview with AGB on July 31st, the day that the Bell Two inquiry report was submitted to the New South Wales Independent Casino Commission (NICC), Peter Cohen – the former CEO of Victoria’s gaming regulator – indicated that there was a 70 percent chance that The Star would see its Sydney casino license suspension extended, while there was a 30 percent chance it would see its license canceled entirely and a zero percent chance that it would be given its license back.
The regulatory expert, currently Director of Regulatory Affairs for The Agenda Group, justified his estimates on the comprehensive executive house cleaning that The Star underwent in the wake of both the first inquiry and the proceedings of the second inquiry.
But why would authorities choose to extend the casino license suspension period?
Why not cancel?
While noting that providing a third chance (via the casino license suspension extension) could communicate that the “operator is too big to fail”, Cohen anticipates that the findings of Bell Two will likely indicate that “The Star is not ready to get their license back yet”.
But for the regulator it’s a difficult decision, with the best “political cover” being to “give them more than every chance to get their license back”.
The suspension extension does not mean that the casino will close, notes the former regulator, merely that it will continue under a manager (as now will be the case until end-March 2025) “and that the government and the regulator will go through a process of relicensing or retendering for the license for the casino […] that would probably take maybe 18 months to do […], and in 18 months’ time, who knows, Star might be eligible or suitable to get it back anyway”.
What happens if it’s canceled?
Unlike Melbourne, where Crown Resorts holds a monopoly on the casino license, Sydney was set up to encourage competition, with the Australian Competition and Consumer Commission (ACCC) potentially choosing to weigh in on what should happen if The Star Sydney’s casino license is canceled. However, the decision regarding that competition necessity “was 12 years ago, and circumstances have changed,” notes the expert.
Rumors have abounded that Crown Resorts, Australia’s largest gaming operator and controlled by investment giant Blackstone Group, could be on the market to acquire The Star’s Sydney casino.
“But there are equally the same number of rumors saying Blackstone doesn’t want to spend any more money because they’re underwater in the deal,” Cohen references other opinions circulating in the gaming space.
But why would Crown want another gaming venue across the harbor? It already has Crown Sydney on Barangaroo’s coastline, what’s the advantage of something across the harbor?
“It does provide Blackstone with the one thing they don’t have, that’s poker machines,” notes Cohen.
Who’s interested and why?
Options aren’t just limited to local contenders, but they do have to run the gambit of being deemed suitable by regulators.
Rumors previously circulated that a Hard Rock entity was interested, and The Star has indicated that there was interest in ‘investment’ while not totally detailing the possibility of a takeover. The Hard Rock rumors were later dispelled but investors could be circling.
“It is certainly at a very depressed price point. So perhaps that’s a reason why people might think that it’s a good purchase, but it comes with an element of risk, because it’s licensed. It’s not guaranteed here, and it’s not guaranteed in Queensland either. Though it’s more secure there, it’s nevertheless not secure”.
On a pure hypothetical, Cohen notes that a potential highly regulated entity based in a jurisdiction like Macau or Las Vegas (including Blackstone), or a consortium (possibly put together by pubs and clubs king Bruce Matheson, who had previously expressed interest in upping his stake in The Star beyond 9.6 percent), if found suitable, could mean “the moment they’re in the marketplace and get those licenses, I think those licenses become more secure. Not in a technical sense, but in a process sense. They put the wheels in motion to satisfy the regulator that they’ll get those licenses secured”.
Ripple effect
A key sticking point of the whole affair is how the potential cancellation of The Star Sydney’s casino license could reflect on the parent company itself, and possible impacts on the group’s other properties, such as the soon-to-open multi-billion-dollar project Queen’s Wharf Brisbane.
“The regulatory risk for them is if The Star in New South Wales is found to be unsuitable and loses their license in Sydney […] it calls into question whether the parent company is suitable and that becomes an issue for the Queensland regulator”.
However, “it’s quite possible for regulators to come to different decisions on the same facts,” notes Cohen.
The Star’s first five-star hotel and casino is set to open at Queen’s Wharf Brisbane on August 29th, a 50-percent joint venture between The Star and two Hong Kong-listed entities Chow Tai Fook and Far East Consortium.
The project was first envisioned as a way to “tap into the international Asian market,” notes Cohen, “designed a bit like Crown Sydney, at least partially for an international business which is not there anymore”.
Regarding further challenges for The Star’s Brisbane property, Cohen notes that its regulatory hurdles – aside from the potential ripple effect from Sydney – are largely behind it, but that “commercially it might have some difficulties”.
“I don’t really know whether they’re going to get their money back or not,” he opines.
Overall, The Star faces an uphill battle, with more details likely to emerge as the Bell Two report comes out (if released publicly) and rampant curiosity over whether the group can keep its Sydney casino license, or suffer serious consequences – potentially creating opportunities for those with the cash, and the risk appetite, to move in.
