Shares in casino operator Echo Enterainment Group Ltd are trading near all-time lows after James Packer yesterday moved a step closer to shaking up the Sydney gaming market with a second casino, dashing Echo's attempt to maintain its casino monopoly in the city.
Meanwhile, Crown shares soared more than 4% in early trade, after the New South Wales government advance the group's $1.5 billion proposal for a VIP-only facility at Barangaroo at the expense of a rival Echo bid for a $1.1 billion expansion of The Star casino.
Shares in Echo fell 4.3% to $2.785 at 1420 AEST, after touching an intra-day low of $2.75, just off their all-time low of $2.745.
Echo listed in 2011.
The fall came after Echo shares lost 4.3% on Thursday, ahead of confirmation that Premier Barry O'Farrell would progress Mr Packer's proposal to the crucial third stage of the state government's unsolicited proposal process for major projects (see Cliona O'Dowd's Collected Wisdom).
If Crown's plans win final approval it will provide competition in the lucrative VIP-gaming market that Echo currently dominates in Sydney.
At 1420 AEST, Crown shares were up 3.24% to $12.605, after reaching $12.95 earlier in the session.
Echo takeover not on horizon: Craigie
Crown chairman Rowen Craigie has dismissed the chances of a Crown takeover of Echo even as analysts point to the returns on offer from a proposed second casino in Sydney, The Australian Financial Review reports.
According to the newspaper, Mr Craigie said the endorsement of Crown's Sydney bid over Echo's did not accelerate the potential for a takeover.
"No, it’s not on our radar screen," he told the AFR.
O'Farrell backs Crown bid
Mr O'Farrell stressed the approval for Crown's bid was "not a licence to build" but a licence to move to the next stage.
The NSW premier said the tax paid on the business would be 29%, higher than the 27.5% proposed by Crown in its bid.
Mr O'Farrell also flagged some provisions for Crown's VIP gaming business.
The parliamentary committee charged with assessing the proposals found Crown's contribution to gross state product and tax was 26% and 31% larger, respectively, than Echo's.
The NSW government retained the right to renege on the agreement at any time because the bids were unsolicited.
Echo wanted to build two new hotels next to The Star and connect Pyrmont, Darling Harbour and Barangaroo into one integrated resort, while extending the company's right to be the state's sole casino operator for a further 15 years.
The head of the independent panel reviewing the proposals, David Murray, said there were "commonalities" in both proposals.