Last week was another tough stretch for Star Entertainment in what has been a long year for the beleaguered Australian operator.
The first incident involved a series of reports, statements and refutations that created a strange discourse regarding acquisition talks between Star and U.S. giant Hard Rock International (HRI) that were eventually disproved.
It all started at 5 a.m. Sydney time May 20, when the Australian Financial Review published a report saying that Star had received a takeover bid from “a consortium led by Hard Rock,” with plans to rebrand Star’s ailing casinos under the Hard Rock umbrella.
In an Australian Securities Exchange (ASX) filing four hours later, Star then seemingly confirmed the bid, saying that it had “received inbound interest from a number of external parties regarding potential transactions.” The company’s stock soared some 20 percent on the news.
Then at 10:30 a.m. Sydney time, Inside Asian Gaming reported that HRI had vehemently denied the report, with the company saying, “Hard Rock is not a member of any group looking to acquire Star or leading any such initiative.”
Less than a half-hour later, Star submitted another filing explaining that it was in talks with Hard Rock Hotels & Resorts (Pacific), which Star believed was “a local partner of Hard Rock.”
HRI then issued a formal press release again flatly refuting the reports.
“We want to make it clear that Hard Rock International is not involved in, nor has it authorized, any discussions, activities or negotiations on its behalf in connection with a proposed bid for Star,” it said. “Hard Rock International has similarly not authorized the use of the Hard Rock brand in connection with any proposed bid for Star by any third party.”
The next day at around 10 a.m. Sydney time, Star submitted another filing, this time clarifying that it had “not received any proposal directly from Hard Rock,” but rather a “consortium of investors which included the entity ‘Hard Rock Hotels & Resorts (Pacific).’” It also added that the reported discussions were not “substantive.”
By the end of the day May 21 it was discovered that Patrick Farrugia, a developer in Brisbane who had previously been associated with the now-defunct Hard Rock Cafe in Surfers Paradise, was the party claiming to be connected to HRI.
Farrugia told the AFR that his ties to HRI were “confidential between us and Hard Rock, and us and Star. Our only comment … is that our long-standing arrangements with Hard Rock Inc USA (& related entities) and the Seminole [Tribe] are confidential and between us.”
Meanwhile, IAG reported that Farrugia “has been the recipient of a number of cease-and-desist letters” in recent years. HRI is said to be investigating the matter and considering legal action.
Overall, the snafu was an embarrassing example of lack of due diligence for Star, which has also been a theme highlighted in the damaging Bell Two inquiry into the suitability of Star Sydney.
In their closing statement earlier this month, Star’s attorneys acknowledged the company’s shortcomings but argued that the company should be allowed to continue operating under supervision.
Prosecuting attorney Caspar Conde disagreed in his closing remarks May 22.
“In terms of present suitability, our submission remains that you would conclude that the Star and Star Entertainment are not presently suitable regardless of any proposal in relation to license conditions or the manager,” he said, per IAG.
The inquiry has unearthed several problematic aspects about Star’s remediation efforts, including a lack of cooperation with state regulators, the falsification of harm minimization records and basic operational failures that included a multimillion-dollar loss from a faulty ticket cashing machine.
Former CEO Robbie Cooke stepped down March 22 and former chairman David Foster was replaced by Anne Ward April 29, but remains on the board in a non-executive role.
Commissioner Adam Bell SC is now due to submit his final report to state regulators by the end of July.
