Hong Kong billionaire Henry Cheng’s Chow Tai Fook Enterprises and tycoon David Chiu’s Far East Consortium had rescued cash-strapped Star Entertainment Group from the brink of collapse after agreeing to buy the Australian casino operator’s stake in a Brisbane property.
An illuminated logo at the Star complex, operated by Star Entertainment Group Ltd., in Sydney, Australia, on Tuesday, Sept.3, 2024. Star Entertainment Group’s future hangs in the balance after an inquiry found the company had suffered from dysfunctional leadership, questionable ethics and culture, and remains unfit to operate its Sydney casino. Photographer: Brent Lewin/Bloomberg
The Hong Kong partners will pay A$53 million ($33.4 million) for Star’s 50% stake in the Brisbane integrated casino complex, Hong Kong-listed Far East said in a statement late Friday. Star will immediately receive A$35 million, injecting much needed cash to the embattled company, which counts Australian billionaire Bruce Mathieson among its shareholders.
As part of the transaction, Star will acquire the stakes of its Hong Kong partners in their Gold Coast Project, consisting of two hotel towers, with Chow Tai Fook and Far East will retain certain rights to participate in the next tower to be built on the site, according to the statement.
Star has been seeking fresh capital amid slumping gaming revenues. Last month, the company said it is exploring various options to increase its liquidity, including the sale of its stake in the Brisbane integrated casino resort complex, as it has limited capacity to raise A$150 million in subordinated debt. This funding is a crucial requirement for unlocking an additional A$100 million loan.
The troubles of Star started in 2021 after the Sydney Morning Herald reported that the company allowed money laundering and organized crimes in its casinos for years. The following year, regulators ruled that the company was unsuitable to operate its casinos in Sydney and Queensland, placing them under government supervision. Since then, almost A$4 billion in Star’s market capitalization has been wiped out.
Chow Tai Fook—the private investment company of the Cheng family—is participating in the Star deal even as patriarch Henry Cheng is grappling with unprecedented losses and burgeoning debts at their flagship company, New World Development. That’s blown a hole through Cheng’s fortune, which was down $2.6 billion—the biggest drop in dollar terms than anyone when Forbes published the list of Hong Kong’s 50 richest last month—to $19.5 billion, though he remains the third richest.
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