Reports have surfaced indicating that Hard Rock is part of a consortium seeking to invest in Star Casinos. This potential investment, initially reported by the Australian Financial Review on May 20, suggests a significant rebranding and strategic shift for Star’s land-based casinos.
The proposed plan involves rebranding all Star casinos under the Hard Rock name. The initiative aims to diversify revenue streams by focusing on non-gaming activities such as live music events and hotel services, reducing the reliance on casino revenues. This news had an immediate impact on the stock market, with Star shares rising more than 21% shortly after the announcement. As of the latest update, shares are trading 19.5% higher than the day’s opening price.
In an initial response, Star acknowledged the receipt of “inbound interest” from multiple external parties concerning potential transactions. The company clarified that this interest is unsolicited, preliminary, and non-binding, with no approach having led to substantive discussions yet. Despite this, the announcement marks a significant moment for Star, given its ongoing challenges.
Star Acknowledges Hard Rock Interest
Subsequently, Star issued another statement, directly addressing the interest from Hard Rock. While Star confirmed that it had not received a direct proposal from Hard Rock, it did acknowledge the involvement of Hard Rock Hotels & Resorts Pacific in a consortium expressing interest.
“The company has received inbound interest from a number of external parties regarding potential transactions, including a consortium of investors that includes the entity Hard Rock Hotels & Resorts Pacific, which Star understands to be a local partner of Hard Rock,” Star stated. This interest, they emphasized, remains confidential, unsolicited, preliminary, and non-binding, with no substantive discussions having taken place thus far.
The Trials and Tribulations of Star
This potential investment comes at a turbulent time for Star, which is currently under scrutiny due to a series of regulatory inquiries. The second Bell Inquiry, launched in February, is examining Star’s activities in New South Wales (NSW), following up on the recommendations of the first Bell report. A year after the initial inquiry, Star Sydney has implemented 22 out of the 30 recommended measures from the report.
The inquiries are not only focusing on compliance but also on the corporate culture at Star. Issues such as risk management practices, management, and reporting structures are under review. Additionally, there is scrutiny over whether Star has secured the necessary financial resources to support its operations.
Regulatory Challenges in Queensland
Star is also facing potential regulatory action in Queensland. In December 2022, Star was fined AU$100 million and faced the suspension of its license due to a series of operational failings. These failings included misleading banks and regulators regarding the use of China UnionPay transactions, engaging with individuals linked to criminal organizations, and lapses in anti-money laundering and social responsibility practices.
Initially, Star was given until December 1, 2023, to address these issues, but this deadline has been extended to May 31, 2024, following the submission of a draft remediation plan. Recently, this deadline was pushed further to December 20, 2024, as authorities await the outcomes of the ongoing Bell Inquiry before making a final decision on Star’s license.
Leadership Changes Amidst Turmoil
Adding to the complexity, Star has seen several high-profile departures in recent months. This includes the exit of group CEO Robbie Cooke and CFO Christina Katsibouba. Additionally, Jessica Mellor is stepping down as CEO of Star Gold Coast, and David Foster is leaving his role as executive chair.
Despite these challenges, Star reported some financial improvements in its Q3 trading update, with a net loss of $6.8 million, which is a significant improvement from the $49.7 million loss in the previous year. However, revenue for Q3 dropped by 4.6% to €419.2 million, and normalized EBITDA fell by 11.5% to $37.9 million.
Hard Rock’s Strategic Moves
As for Hard Rock, the company has been active in other ventures. Recently, Hard Rock Digital struck a deal to acquire certain US-facing B2C assets from 888 Holdings. While specific details of the assets have not been disclosed, the deal is expected to finalize by Q4 this year.
Additionally, Hard Rock announced plans to close The Mirage Hotel & Casino on July 17 for renovations. The redevelopment will feature a new integrated resort, including a 700-foot guitar-shaped hotel tower. The iconic Las Vegas venue, taken over by Hard Rock in 2022, is the first on the Strip operated by Florida’s Seminole tribe.
The potential partnership between Hard Rock and Star represents a significant development in the casino industry, promising to reshape the landscape of Australian casinos and strengthen Hard Rock’s global presence.
