James Packer has dumped his 10% stake in rival casino operator Echo Entertainment, fueling speculation that the Crown Ltd. boss has received some private assurance that his Sydney casino license bid will be approved. The New South Wales government is currently mulling Crown’s proposal to build a $1b VIP-focused casino in Sydney’s Barangaroo development. NSW is also considering a rival bid by Echo to expand The Star casino into a full-fledged integrated resort if NSW extends Echo’s Sydney casino monopoly beyond its 2019 expiration date.
The fact that Packer sold his Echo stake at a significant loss will only lend credence to the already widely held suspicion that NSW Premier Barry O’Farrell has long since determined that Packer will win the Sydney derby. Packer raised his Echo stake to 10% last February at around $3.80 a share, but the Australian Financial Review reported that Packer has tasked investment bank UBS with offloading his shares at $3.20 apiece – itself a discount to Echo’s $3.44 valuation at Thursday’s close. News of the selloff comes less than a week after Crown received regulatory approval to boost its Echo holdings to 23%, which had been seen as Packer’s insurance policy in case Echo’s Sydney pitch prevailed over Crown’s. But who needs insurance when you’re on to a sure thing?
As if the increased likelihood of having to compete with Crown in Sydney wasn’t bad enough, The Star is also facing a new multi-million dollar tax to pay for the cost of regulating its operations. The NSW government has introduced legislation to shift the burden of funding the Independent Liquor and Gaming Authority’s casino monitoring operations from taxpayers to the casino itself. The precise figure The Star would be expected to pay isn’t spelled out in the legislation, only that whatever fee is determined appropriate will also be adjusted for inflation.
