Shares in Star Entertainment Group fell by more than 7 per cent on Monday after the company confirmed that it has terminated talks with joint venture partners Chow Tai Fook Enterprises and Far East Consortium International.
The talks began in March to sell Star Entertainment’s stake in the Destination Brisbane Consortium (DBC) and Destination Gold Coast Consortium (DGCC), owners of The Star Brisbane and The Star Gold Coast, to its joint venture partners.
“As of this morning, the parties have been unable to reach agreement on a number of outstanding commercial issues which in turn prevent the finalisation of long form documents,” the company said in a statement late Friday (1 August).
The company added that it requested an extension to 6 August to allow further time to conclude negotiations, but this was rejected by its joint venture partners. As a result, the heads of agreement between the parties was terminated on 31 July.
This means that Star Entertainment will retain its 50 per cent stake in the DBC consortium and 30 per cent stake in the DGCC consortium, alongside certain other assets.
The Star must now repay A$10 million to its JV partners by 6 August and also reimburse them for its share of equity contributions that have been made to DBC since 31 March, which amounts to an estimated A$31 million payable by 5 September.
If these amounts are not repaid, Star Entertainment will have to transfer its one-third interest in Tower 1 Hotel at the Gold Coast to its JV partners.
The company added that the $35 million prepayment it received from the consortium in share of net sale proceeds for apartments in the Tower 2 development on the Gold Coast survives the termination of the heads of agreement.
Star Entertainment announced the agreement to exit the JV in March for an upfront cash payment of $53 million, including the $35 million prepayment, with the company expecting to save $212 million by making no further equity contributions to the JV after 31 March.
The company was also in line to benefit from a potential earnout of up to $225 million, based on DBC’s FY30 EBITDA.
“The Star is continuing to engage with the Joint Venture Partners and will provide an update if there are any material developments regarding the parties’ respective interests in DBC and DGCC,” the company added in its statement.
“Given the termination of the HoA, The Star is considering what alternative options may be available to it in relation to its 50 per cent equity interest in DBC, along with the Treasury Brisbane hotel and car park and its 50 per cent equity interest in the Charlotte Street Car Park (Festival).”
Shares in Star Entertainment Group (ASX:SGR) fell 7.61 per cent on the news to close at A$0.085 per share in Sydney Monday, having set a new 52-week low of $0.083 per share earlier in the day.