Genting boss Lim Kok Thay has confirmed that his company intends to raise its stake in Australian casino outfit Echo Entertainment, provided Aussie regulators approve the plan. Two subsidiaries of Malaysia’s Genting conglomerate acquired a total of 9.9% of Echo last year, but Genting Singapore sold its 4.8% stake shortly thereafter. Genting Hong Kong has since increased its Echo stake from 5.2% to 6.6% and is awaiting regulatory approval to boost its stake to as much as 25%.
That Genting and Echo would seek some kind of fusion isn’t all that strange. In terms of revenue generation, Genting and Echo are the two largest Asian-facing casino companies that lack a presence in Macau. Lim said his company would love the opportunity to bid on a Macau casino concession if the government decides to open a public tender rather than automatically renew the existing deals, saying Genting “would be the first one knocking on that door and try our luck.” Lim also confirmed that Genting would be making a concerted push to bag one of Japan’s casino licenses now that Prime Minister Shinzo Abe’s legislative obstacles have been removed.
NEW FRONT OPENS IN ECHO V. CROWN WAR
Genting’s most recent purchase of Echo stock was made in advance of the New South Wales government’s decision to allow Crown Ltd. to open a VIP-focused casino in Sydney once the monopoly enjoyed by Echo’s The Star casino expires in 2019. Echo and Crown are now squaring off in Queensland, where Echo runs the Treasury Casino in Brisbane as well as two Jupiters casinos in Townsville and the Gold Coast. In a Sydney déja vu, Echo and Crown have made rival proposals to build an integrated resort-casino in Brisbane’s central business district. A decision isn’t expected until September, but early indications are that this fight will prove to be as nasty as the Sydney campaign proved.
Echo chairman John O’Neill made headlines earlier this month with his claim that he’d had a secret meeting in March with Crown boss James Packer on the latter’s yacht in Sydney Harbour. O’Neill told the Australian Financial Review that Packer had “categorically” promised to keep Crown out of the Queensland market if Echo “behaved” in the Sydney competition. O’Neill also said Packer had stated he was “110% confident” that NSW Premier Barry O’Farrell’s government would side with Crown over Echo in Sydney.
Crown has strenuously rejected O’Neill’s allegations, but the Australian Competition and Consumer Commission has launched an investigation into whether the two companies breached competition and cartel laws. The animosity between the two companies is amply demonstrated by O’Neill’s allegations, which, if true, could send both executives to jail. Does O’Neill hate Packer so much that he’s willing to take himself out in order to injure Packer?
CROWN SYDNEY”S SECRETS AND LIES
Similar to newly elected politicians scaling back promises made on the campaign trail, the lofty expectations of the revenue Crown’s Sydney hotel-casino will generate for the state have already been given a significant haircut. Last year, Crown commissioned an economic benefit analysis that determined gaming taxes on Crown Sydney would be $114m per year. Adding the initial $100m license fee, the NSW government was told it could expect a return of $1.81b over the first 15 years of Crown Sydney’s operation. The O’Farrell government now says Crown will contribute $60m per year in taxes, reducing that 15-year haul to an even billion.
Worse, it seems the independent report in which consultants at Deloitte checked out Crown Sydney’s claims of economic benefits to the state had concluded there was little justification for Sydney to add a second gaming venue. The report, which was held back by O’Farrell’s administration until after it had chosen Crown over Echo, said there was little evidence that a second Sydney casino would do much to boost NSW tourism. Packer had suggested Crown Sydney would “draw millions of visitors” to the region but Deloitte estimated the project would boost Sydney’s tourist ‘visitor nights’ by a mere 0.03%.