Echo splashes out to keep Crown away from the table
Echo held out the investment bait to the NSW government on Tuesday, marking a significant escalation in the battle between Echo and James Packer's Crown Limited as the former media mogul turned gambling tycoon tries to break Echo's effective casino monopoly in Australia's biggest city.
Echo released initial plans to move to stage two of the NSW government's casino proposals process, proposing it would push ahead with the next phase of the Star casino's development with money invested in the complex as well as "state tourism infrastructure".
"Echo looks forward to the opportunity to work collaboratively with the NSW government to develop a compelling proposal that could result in major additional investment in tourism infrastructure in the heart of Sydney's tourism precinct of Darling Harbour and Pyrmont," Echo chief executive John Redmond said.
The amount Echo intends to invest, if its exclusive casino licence is extended beyond November 2019, was not detailed in the proposal, but is expected to be in the hundreds of millions of dollars.
In October 2007 Echo, then called Tabcorp, paid about $100 million to the NSW government for a 12-year exclusivity extension to 2019, justifying an $840 million capital expenditure program. Echo is also considering an integrated casino resort in Brisbane, which could cost $1 billion.
The offer to the NSW government, with the exclusivity hook tied in, is an obvious play to brush Mr Packer and his Crown group out of the running to develop their own billion-dollar casino at Barangaroo.
The Star's gaming licence was granted in 1994 and runs until 2093. The new proposal from Echo seeks to limit NSW to a single gaming licence until 2019.
Echo and Crown's casino proposals are by their nature mutually exclusive and are being considered by David Murray, the former chairman of the Future Fund.
NSW Premier Barry O'Farrell said in a statement on Tuesday that Echo's investment proposal argued that the state would be a stronger competitor in the international tourism market with one large resort instead of two.
Macquarie Securities analyst Andrew Levy said Echo had increased the pressure on Mr Packer's Barangaroo submission.
"We see two possible impacts on Crown's Barangaroo proposal. Firstly, the more competitive process may force Crown to amend its submission to improve the returns to the state. Secondly, if Echo is successful in extending exclusivity, this clearly prevents the Barangaroo proposal from being successful. This would not necessarily be a poor outcome for Crown shareholders, given question marks over the project's viability."
He said if Echo extended its exclusivity, and Crown remained determined to enter the Sydney market, it would need to acquire Echo. Crown owns 10 per cent of Echo.
Frequently Asked Questions about this Article…
Echo told the NSW government it could invest heavily in upgrading the Star casino and nearby tourism infrastructure if it is allowed to extend its exclusive casino licence beyond November 2019, moving to stage two of the state's casino proposals process and tying the investment offer to exclusivity.
The proposal did not give a precise figure, but Echo said the investment would be expected to be in the hundreds of millions of dollars. The article notes Echo (then Tabcorp) previously paid about $100 million in 2007 for a 12‑year exclusivity deal that backed a substantial capital program, and Echo is also considering a separate $1 billion integrated resort in Brisbane.
Echo's offer to extend exclusivity is designed to block rival proposals such as Crown's plan for a billion‑dollar casino at Barangaroo. The two proposals are mutually exclusive, and if Echo wins an exclusivity extension it would prevent the Barangaroo proposal from succeeding unless Crown changes strategy or seeks to acquire Echo.
The competing Echo and Crown proposals are being considered by David Murray, the former chairman of the Future Fund, as part of the NSW government's casino proposals assessment process.
Premier Barry O'Farrell said Echo's pitch argued the state would be a stronger competitor in the international tourism market with one large resort instead of two, reflecting Echo's position that a single, major integrated resort would boost Sydney's tourism precinct.
Andrew Levy said Echo's move raises pressure on Crown in two ways: it may force Crown to amend its Barangaroo submission to improve returns to the state, and if Echo secures an exclusivity extension it would effectively prevent the Barangaroo proposal from succeeding — though that might not be a poor outcome for Crown shareholders given questions about project viability.
According to the article, The Star's gaming licence was granted in 1994 and runs until 2093. Echo's new proposal seeks to limit New South Wales to a single gaming licence until 2019 as part of its bid to preserve exclusivity in Sydney.
For investors, the outcome could influence future capital spending, market competition and shareholder value: a successful Echo exclusivity extension could mean large near‑term investments in Sydney and block Crown's expansion into Barangaroo, while a competitive process could force Crown to improve its offer to the state or consider acquisition strategies — Crown already owns about 10% of Echo, a fact noted in the article.
Call 1300 880 160
Start a chat
Schedule a call
