By Himanshi Akhand and Rishav Chatterjee

(Reuters) -Star Entertainment said on Monday a consortium that hosts a local partner of Florida-based Hard Rock Hotels & Casinos is considering a bid for the cash-strapped Australian firm, sending its shares 20% higher.

A potential takeover by entertainment giant Hard Rock would provide a much-needed financial lifeline to Star, which has been plagued by a regulatory inquiry into its flagship Sydney casino operation and an executive exodus.

Star, which had a market value of A$1.29 billion ($863.66 million) as of Monday’s close, said it has been approached by a consortium of investors which includes Hard Rock Hotels & Resorts (Pacific).

The company said it understands Hard Rock Hotels is a local partner of Hard Rock.

However, Hard Rock International said in a statement that it “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 added that it was investigating the matter.

Earlier in the day, Star said it had received “inbound interest from a number of external parties” but flagged none of them had yet resulted in “substantive discussions”.

Star was responding to an Australian Financial Review report that a consortium led by Hard Rock was considering taking control of Star.

The Hard Rock bid will aim to make Star primarily source its earnings from restaurants, hotels and entertainment, the report said, adding that the Australian company would become less dependent on casino income.

“While the market has reacted positively to the speculation about an acquisition by Hard Rock, Star Entertainment Group’s 73,000 shareholders will have a large say in the outcome of this,” said Ben Williamson, co-founder and co-CEO at investor marketing platform InvestorHub.

“Star will need to engage its entire base to ensure any takeover is successful.”

Shares of Star ended 20% higher at A$0.54 on Monday, and were the top gainer on the Australian exchange, which rose 0.6%.

Australian casino operators have been under the lens of regulators over the last few years, with Blackstone-owned Crown Resorts also facing inquiries that exposed a slew of wrongdoings.

Star is undergoing a regulatory inquiry to keep its gaming licence at the Sydney casino, which makes its future uncertain. The final report is due on July 31.

The company is also looking for a new chairman and a CEO after both resigned earlier this year.

($1 = 1.4937 Australian dollars)

(Reporting by Himanshi Akhand and Rishav Chatterjee in Bengaluru; Editing by Sherry Jacob-Phillips, Nivedita Bhattacharjee and Subhranshu Sahu)