The Hong Kong-listed joint venture partners in The Star’s Queen’s Wharf Brisbane are reportedly in talks with rival Crown Resorts over a possible takeover of the company’s stake.
If the deal goes through, it would allow Australia’s largest gaming operator access to Queensland, significantly expanding its gaming portfolio.
According to the Australian Financial Review, Chow Tai Fook (CTFE) and Far East Consortium (FEC) are now in early discussion, citing sources with direct knowledge of the matter.
This comes amongst a power play by CTFE and FEC regarding their purchase of the remaining 50 percent stake that The Star owns in the property, which will either materialize or collapse pending a deadline at the end of July.
The possible sale of The Star’s stake to Crown would be a highly strategic move lending the legitimacy of the Crown brand to the Queen’s Wharf casino. Under previous negotiations, The Star was going to remain as casino manager until March 31st of 2026– lending its name to the license until the JV partners could have the license transferred into their name. However, this would require authorities to investigate the suitability of CTFE and FEC to hold a casino license in the state.
Previously Hong Kong-listed entities, like CTFE, have faced concerns over alleged links to underworld figures tied to junkets.
The AFR notes that Blackstone-backed Crown is not the only one in discussions over a takeover of the stake in Queen’s Wharf, with Australia and New Zealand casino operator SkyCity Entertainment and American hospitality group Delaware North also involved.
Extended negotiations
The Star initially agreed with CTFE and FEC to sell its 50 percent stake in Queen’s Wharf back in March, during one of the most complex periods of the embattled operator’s struggle to stay financially afloat.
The deal allowed for The Star to pull out from the Queen’s Wharf project (and the relevant associated debt) and consolidate its position on the Gold Coast, upgrading to 100 percent interest in The Star Gold Coast’s gaming and non-gaming operations.
If the deal with the JV partners does not go through, The Star stands to pay back AU$10 million ($6.54 million) to each JV partner. If it fails to do so, it would be required to transfer its 33.3 percent interest in Tower 1 of the property, and The Star would also not receive a further AU$8 million ($5.24 million) third tranche payment from the JV partners. In total, The Star would need to pay back approximately AU$36.5 million to CTFE and FEC.
Meanwhile, The Star has partnered with US-gaming operator Bally’s Corporation – which provided it a financial lifeline, along with pokie mogul Bruce Mathieson.
According to the AFR, Bally’s chairman Soo Kim is interested in running the Queen’s Wharf casino operation, noting that the JV partners “are also deeply dissatisfied with operating performance”.
The executive told the publication: “We believe no one will be in a better position than ourselves to run these casinos. We cannot blame the DBC (Destination Brisbane Consortium – the JV) partners for casting about looking for solutions, but we hope that when we get licensed and start to manage these casinos, our performance will speak for itself”
But The Star’s financial position remains tenuous, as it faces a possible AU$400 million ($258.2 million) fine from the gaming regulator – one which it says would send it into insolvency.
The clock is ticking and The Star is under serious pressure.
