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Crown names Steve McCann as new CEO, bidding war erupts

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a man in a suit standing in front of a building

Crown Resorts has named outgoing Lendlease boss Steve McCann as its new chief executive in the midst of a $12 billion merger proposal from its arch-rival The Star and an ongoing regulatory crisis that threatens its gambling licences in three states.

The Star and the James Packer-backed Crown confirmed reports by this masthead that The Star had proposed bringing the two companies together to create a gambling and hospitality powerhouse spanning seven properties in NSW, Victoria, Queensland, and WA.

A tie-up would deliver "significant scale and diversification and unlock an estimated $2 billion in net value from synergies," The Star's chairman John O'Neill said in a statement.

"With a portfolio of world-class properties... the combined group would be a compelling investment proposition and one of the largest and most attractive integrated resort operators in the Asia Pacific region."

The Star has casinos and resorts in Sydney, Brisbane, and the Gold Coast. Crown owns its sprawling flagship Melbourne property, its Crown Perth resort, and its new $2.2 billion Crown Sydney tower.

However, NSW has suspended the casino licence for Crown's new property at Barangaroo in the wake of the damning Bergin Inquiry, which last year detailed evidence of money laundering and other probity issues at Crown Melbourne and Crown Perth. Royal commissions examining its Victorian and West Australian licences are underway.

a group of people standing in front of a store: 28/02/21 A general view of the exterior of Crown Casino, Southbank, Melbourne. Photograph by Chris Hopkins GENERIC

Revealing previously unreported detail, The Star said its proposal included a cash alternative allowing Crown investors to take $12.50 for some of their shares rather than scrip in the new combined company. The cash component is limited to up to 25 percent of Crown's issued share capital. Crown's shares closed at $12.12 on Friday.

The Star said the $2 billion in value unlocked through a merger implied the deal would be worth more than $14 per share for Crown investors. US private equity fund Blackstone offered $12.35 per share for a full takeover of Crown, in a revised offer it lobbed over the weekend. American outfit Oaktree has also made an approach.

Crown's existing shareholders would own around 59 percent of the newly merged company while The Star's would own around 41 percent.

Crown said it had not yet formed a view on the merits of the proposal. However, it did announce that outgoing Lendlease boss Steve McCann would take the reins at its chief executive and managing director.

Crown's previous CEO, Ken Barton, resigned in February along with five Crown directors in the wake of the Bergin inquiry, which found the company was unfit to run its new Sydney casino.

Chairman Helen Coonan has been filling the role as executive chairman, which will continue until McCann receives the necessary probity approvals to start the job.

"Steve is a first-class appointment for Crown and the right person to embed the ongoing reforms necessary to restore regulatory and public confidence in our operations," Ms. Coonan said in a statement.

"Steve has a unique blend of strategic, financial, and corporate governance expertise and a track record of building strong employee engagement and driving cultural change."

Ms. Coonan said Mr. McCann was "ideally placed to hit the ground running as our sweeping reform program takes hold."

Mr. McCann has been CEO of property giant Lendlease for a decade and delayed his retirement from the group to oversee its response to the COVID-19 pandemic. He is set to step down on May 31.

"I am looking forward to joining Crown at a crucial time for the organisation and see a real opportunity to help drive significant shareholder value as the company addresses its challenges and emerges from the constraints of the pandemic," he said.

The Star has also flagged unlocking "significant value" by potentially selling the merged companies' properties and leasing them back. This type of arrangement is becoming common in the hotel and casino industry. Blackstone, for instance, owns the two Las Vegas casino properties and leases them to MGM.

The Star's NSW casino licence prevents anyone shareholder from owning more than 10 percent of the company. The group said a merger would require James Packer - who owns 37 percent of Crown - and gaming authorities to agree to "appropriate undertakings" given his stake in the new company could be above the limit.

Mr Packer has been looking to sell out of Crown for several years. The cash alternative in The Star's proposal could mop up some of his stake.

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