More light has been shed on Friday’s impromptu meeting of the board of Australian casino operator Echo Entertainment that resulted in chairman John Story stepping down from his post. The move to show Story the door was decided by a 4-3 vote, with interim chairman John O’Neill voting with the majority. The Australian reports that the minority argued for Story’s fate to be decided by shareholders at the July 20 extraordinary general meeting, as originally requested/demanded by Crown Ltd.’s James Packer, who holds 10% of Echo’s stock and covets Echo’s monopoly casino license in Sydney.
For the moment, Packer has withdrawn his request/demand for a vote on installing former Victorian premier Jeff Kennett in Story’s place, but Packer hasn’t given up on Kennett taking the seat eventually. Packer issued a statement on Friday saying he maintains Kennett “would add significant value to Echo as a director. We appreciate that this will be best achieved with the support of the Echo board.” Contacted by the Daily Telegraph, Kennett was cagey about whether he was still seeking a position on Echo’s board. Echo stock rose 4.4% following Friday’s events, while Crown fell 2.8%.
Shares in Genting Singapore – which announced Friday it had quietly acquired a 4.9% stake in Echo worth about $150m – fell to their lowest level in eight months over shareholder concerns that the company will get into a costly bidding war with Packer for Echo control. Genting Berhad, the investment division of the Genting Group, is sitting on MYR17.4b (US $5.5b) in cash and equivalents, so it could buy Echo tomorrow without needing to go through the bother of raising capital. But since Genting Berhad’s debt-to-equity ratio is twice as good as Las Vegas Sands, and four times better than Wynn Resorts, it may choose to finance this project at favorable rates while saving cash for opportunities in other markets, such as South Korea, Mongolia and Japan. Fitch Ratings analyst Michael Paladino told Reuters the latter was the real prize, combining a massive market with a country that is already more of a ‘destination’ than other options in the region.