Analysts believe that James Packer may be on his way out of Macau as early as next year. Packer is thought to be building up his resources to provide the $3.6billion that he will need to finance a takeover of rival Echo Entertainment and may use his stake in Melco Crown to finance it.
Merrill Lunch analyst Nathan Gee said, “We can’t discount a Crown takeover of Echo, but we think a deal is unlikely until 2012. A combination of Crown and Echo could create about $600m of net present value synergy benefits.”
Echo is in the process of upgrading its three casinos in Queensland for the princely sum of $1.6bn and the relaunch of The Star will be a “critical time for Echo Management,” according to Gee. This is why Crown is waiting before making any bid. As far as getting out of Macau, Gee added, “We can’t rule out Crown looking to divest MPEL, particularly if the Australian market continues to discount the value of Macau relative to the Melco Crown share price.”
Melco Crown is the joint venture that his company shares with Laurence Ho. Given the growth that the enclave is experiencing, it’s slightly odd that Packer feels as though he needs to give up his stake. It comes after Melco Crown’s recent investment in the Cotai strip and we can’t say that this would be Packer’s best move. Macau’s well-fortified bubble doesn’t look like being breached anytime soon. He may know something that we don’t. Remember though James – you can never have too much of a good thing and Macau is even better than a good thing right now.
Macau has also seen public revenue rise by 46.4% for the first five months of the year. Direct taxes on gaming were a large contributor to the increase as they were up 46.2% to MOP35.17billion according to the Financial Services Bureau. The total public revenue reached MOP41.65billion and this contributed to the total public expenditure that reached MOP12.19billion. That increased 69.6% compared with last year and was down to increased transfer payments to autonomous agencies and payment of the wealth partaking scheme for 2011.