THERE was no news from the board of the New South Wales casino regulator on Thursday on whether James Packer's Crown will be allowed to lift its stake in rival casino operator Echo Entertainment, but it did not stop speculation that a takeover is making more sense than ever.
According to research from Deutsche Bank, Crown shares have outperformed Echo's by 56 per cent over the past six months, making a scrip and debt-based takeover much more palatable for Crown.
Deutsche Bank's Mark Wilson said the financial metrics were more compelling with the dilution of Crown's earnings per share now 7 per cent compared to 14 per cent under previous calculations and "the dilution of James Packer's shareholding would now be within acceptable tolerance levels".
Deutsche based its calculations on a Crown bid split equally between debt and equity funding, and at a 20 per cent premium to the current Echo share price which closed at $3.55 on Thursday.
Crown shares closed at $11.83.
This would dilute Mr Packer's 50 per cent-plus stake in Crown to 39.4 per cent.
Crown is seeking its own licence to operate a resort casino at the Sydney Harbour development, Barangaroo - independently of Echo - but has acquired a 10 per cent stake with the intention of pursuing the alternative proposal of using Echo's licence for the proposed casino at Barangaroo. Deutsche said it viewed the Barangaroo development as "complementary to Echo's flagship casino, The Star.
"We are of the view that Crown remains interested in Echo's assets and licences," Mr Wilson said.
The board of the Independent Liquor and Gaming Authority met Thursday, but was not expected to sign off on a probity check of Crown - in relation to its request to lift its stake in Echo from 10 to 25 per cent after news surfaced last week that Crown's Macau joint venture was under investigation by Taiwan authorities. "Allegations of illegal money transfers against a Melco Crown subsidiary, of which the Crown chief executive is a director, could delay the receipt of these approvals," Mr Wilson said.
The ILGA has remained silent about the investigation but its Victorian counterpart, the Victorian Commission for Gambling and Liquor Regulation, said it was "actively monitoring the situation."
An ILGA spokesman was not able to comment on the outcome of the board meeting.