CASINO

Crown ups profits, doubles stake in Echo Entertainment amid takeover talk

TAGs: Australia, Crown Ltd., Echo Entertainment Group, James Packer, Melco Crown Entertainment, Star Casino

crown-limited-echo-entertainmentAussie casino operator Crown Ltd.’s H1 profits increased to AU $277.4m for the six months ending Dec. 31, a 79% boost over the same period in 2010. Revenues were up 24% to $1.49b. Crown’s bounty stems largely from its one-third stake in Melco Crown Entertainment, its joint venture with Lawrence (son of Stanley) Ho that includes the City of Dreams casino in Macau. While turnover from Melco Crown’s VIP gamblers rose 28%, the performance of Crown’s wholly-owned domestic casinos in Melbourne and Perth was dubbed merely “reasonable” by CEO Rowen Craigie, who cited a “challenging operating environment and the state of the consumer economy” as contributing factors.

Newly flush with cash, Crown chairman James Packer has apparently decided to go on an acquisition bender. Crown has doubled its stake in local rival Echo Entertainment to 10%, the current ceiling imposed by Queensland and New South Wales regulators, at a cost of around $257m. Crown has also applied for regulatory approval to boost its stake beyond 10%, suggesting the start of a takeover bid, but Craigie said Crown’s board “had not made any decision on what the next step may be” until it hears back from regulators. Assuming it gets the nod, Crown’s stake couldn’t rise over 19.9% before it would be compelled to make a formal takeover bid. Crown had apparently sought a seat on Echo’s board to reflect its increased stake in the company, but Reuters reported that Echo deemed the move “inappropriate” due to the fact that Crown is, you know, the competition.

Echo Entertainment also posted H1 profits in its first earnings report since detaching itself from Tabcorp Holdings in June. Echo, which operates Sydney’s Star Casino, Jupiters casinos at Townsville and on the Gold Coast, plus the Treasury casino in Brisbane, recorded a net profit of $70.2m. Like Crown, Echo reported great business from VIP gamblers at the Star Casino, the only gaming joint in Sydney. Echo CFO Matt Bekier said VIP business at its other facilities was also picking up. “You’ve seen the numbers in Queensland already pick up as we start to use our jets domestically, fly people up to the Gold Coast – there’s a lot more we can do on that front.”

The Australian reported that Packer had been trying to coax Echo into a joint venture to share their competing VIP businesses but was rebuffed, as Echo is reportedly quite happy with the status quo. That said, Echo’s efforts to lure VIPs are coming under fire after it was revealed that the Neptune Group, the Hong Kong junket operator who inked a three-year deal with the Star Casino in Feb. 2009, had links to triad gang figure Cheung Chi-tai. Cheung has also been linked to Las Vegas Sands’ operations in Macau. A Star spokesman told the Launceston Times that the company had conducted due diligence on all its suppliers and contracts.

In announcing their earnings, Echo execs felt compelled to address the brouhaha surrounding the alleged “extreme party culture” at the Star that led the Casino, Liquor and Gaming Control Authority to launch an inquiry. Echo chairman John Story played down the controversy, saying the Star was not “a den of iniquity, and I think that is apparent to anyone who visits.” Story said the salacious stories of drug abuse and sexual harassment had “in many instances … lacked factual accuracy, balance and fairness.” Story predicted that the authorities’ final report would act as a “circuit-breaker” on the whole shebang. Sadly, Story neglected to comment on the tales of extremely high high-rollers pissing on the casino carpets, but perhaps that question was a deal-breaker.

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