Malaysian conglomerate Genting has reportedly boosted its stake in Australian casino operator Echo Entertainment to 9.7%, putting it on par with the stake held by James Packer’s Crown Ltd. Echo’s board announced last week that it was looking to raise capital via a share offering, which began Monday. Genting Hong Kong filed papers on Monday indicating it had purchased 19.25m Echo shares – roughly 2.8% of Echo’s issued share capital – for AU $82.5m. Genting purchased a further 2% of Echo for $60m on Tuesday. A couple weeks ago, Genting Singapore announced it had acquired a stake in Echo believed to amount to 4.9%. Genting Bhd. released a statement saying its board of directors “is of the view that investment in Echo presents a good opportunity for the company to diversity the company’s investment portfolio.”
Both Genting and Crown now hold the maximum amount of Echo allowed under its constitution. Crown has applied for regulatory approval to increase its Echo stake to 20% ahead of an expected takeover bid. But cash-rich Genting’s arrival on the scene – with its demonstrated intention to keep pace with Packer and its ability to do so without having to first raise capital – has complicated Packer’s plan. Crown, which operates a mammoth casino in Melbourne, covets Echo’s monopoly casino license in Sydney, while Genting, which lacks a presence in Macau, is looking for another high-profile casino in the region to bolster its Resorts World Sentosa operation in Singapore.
The question remains as to whether Genting and Crown will fight a duel to win Echo’s fair hand, or strike some kind of deal to share control. CLSA analyst Sacha Krien told Business Day that he doubts the likelihood of a Crown/Genting tie-up. “Our base case remains that both Crown and Genting want to control Echo for their own purposes and that an alliance is unlikely. Given neither is likely to be able to control Echo on its own, this suggests a full takeover bid is still the most likely outcome.”
On the same day Genting matched Packer’s stake in Echo, Packer found a way to boost his bankroll to match Genting’s. Aussie pay-tv outfit Consolidated Media Holdings – in which Packer holds a 50.1% stake – received a $2b takeover offer from Rupert Murdoch’s News Corp. Packer has indicated he’ll accept the offer. Let the games begin!
