Previously, regulatory concerns in New South Wales (NSW) had been a barrier to one entity controlling both Sydney casinos. However, with Star Entertainment on the brink of collapse, there are indications that the NSW government may reconsider its stance.
According to The Australian, reports suggest that Blackstone may only move forward with a formal bid once Star enters voluntary istration. The amount of any such bid, however, is unknown.
One key factor driving Blackstone’s interest is Star’s gaming machine assets. If the NSW government permits Crown Resorts to operate poker machines, this could significantly enhance the value of the acquisition.
Blackstone, with over $1tn in assets under management globally, has the financial capability to sustain operations through short-term challenges.
Following its previous acquisition of Crown Resorts, Blackstone is an approved casino operator in Australia. Additionally, Star’s current CEO Steve McCann formerly led Crown, which could facilitate negotiations due to his prior relationship with Blackstone.
Star’s financial stability has deteriorated in recent months. The company reported a sharp decline in revenue, falling to A$299m in the second quarter of the fiscal year, while costs associated with the A$3.9bn Queen’s Wharf precinct development have escalated.
As of December, Star had only A$78m in cash reserves.
Manwhile Blackstone reported a significant increase in net income in 2024, reaching more than $703m in its latest quarter, up from $151.8m the previous year.
Former CFO turns witness in ASIC investigation
Compounding its financial difficulties, Star has faced significant regulatory action. The Australian Securities and Investments Commission (ASIC) is set to commence legal proceedings against former Star Entertainment directors on 10 February.
The investigation stems from allegations of money laundering breaches and misleading financial disclosures.
ASIC has taken civil penalty action against 11 former directors and executives, including former CEO Matt Bekier, general counsel Paula Martin, and former chief casino officer Greg Hawkins.
The allegations involve failure to address money laundering risks tied to the casino’s dealings with Macau-based junket operator Suncity.
The executives are also accused of misleading National Australia Bank (NAB) about the use of China Union Pay (CUP) cards for gambling transactions.
Star’s former chief financial officer, Harry Theodore, has reportedly agreed to cooperate with ASIC’s case. The Australian reports that Theodore has provided a statement detailing Star’s disclosures to NAB regarding CUP transactions.According to ASIC’s filings, NAB had informed Star that the use of these cards for gaming chip purchases was not permitted.
The Australian reports that a specific note sent to NAB in November 2019 — reviewed by both Martin and Theodore — allegedly stated that the funds obtained through these transactions were not used for gaming purposes.
However, Star allegedly provided misleading assurances that the funds were used for non-gambling purposes, including hotel accommodations, private jet travel, and luxury goods.
Theodore’s evidence is expected to play a crucial role in ASIC’s proceedings against Bekier, Martin, and Hawkins.
The regulatory body is seeking to establish that these executives knowingly failed to address compliance risks and provided misleading information regarding financial transactions.
ASIC’s court filings reference internal communications at Star that purportedly misrepresented the use of CUP transactions.
The accuracy of these disclosures is a central element of ASIC’s case.
What’s next for Star
One potential path forward for Star is voluntary istration, with FTI Consulting reportedly being considered to oversee the process. If this occurs, the NSW government may allow Star to defer gaming tax payments, providing temporary financial relief.
Additionally, lenders including Deutsche Bank, Macquarie, and Soul Patts could release escrowed funds to cover operational costs.
Despite these potential measures, Star’s underlying business model remains under scrutiny.
Industry analysts suggest that, given regulatory penalties, operational restrictions — such as the prohibition of cash gaming — and declining revenue, Star may require a significant restructuring.
Some believe that asset sales, either to real estate investors or private buyers, could be necessary to stabilise the company.
ASIC’s case against Star’s former executives is expected to be a lengthy and high-profile legal battle. A court hearing initially scheduled for Monday was postponed to today, ahead of the trial’s expected commencement next week.
If Blackstone proceeds with a bid for Star, it would consolidate its position as the dominant casino operator in Australia. However, regulatory approval and financial restructuring will be key hurdles in determining whether such a transaction can move forward.
