Packer go-ahead to raise stake in casino rival Echo
The announcement by the Independent Liquor and Gaming Authority (ILGA) comes a year after it launched a statutory investigation into whether Crown and its associates, including Mr Packer, are "suitable persons" to be associated with the Star casino.
Crown applied in February last year to lift its stake in the rival casino operator from 10 per cent to 25 per cent. However, the ILGA says it will only allow Crown to lift its stake to 23 per cent.
The authority decided on 23 per cent because a 25 per cent shareholding would trigger change of control provisions in US securities issued by Echo last year.
Crown's application to increase its shareholding must be signed off by gaming authorities not only in NSW but also in Queensland, where Echo owns casinos.
The Queensland Office of Liquor and Gaming Regulation has yet to announce a decision, but the NSW approval is a significant step and indicates that permission is likely to be granted.
When Crown made its application last year, Mr Packer was engaged in an aggressive campaign for a seat on the Echo board with a view to controlling the company's exclusive Sydney casino licence.
Mr Packer planned to use the licence to run a VIP-only, high-roller casino in his proposed $1 billion hotel complex at Barangaroo.
However, after the NSW government indicated that would not be possible, Crown lodged an unsolicited proposal to be granted a second Sydney casino licence after Echo's exclusivity arrangement expires in November 2019.
Last month it was revealed Echo has lodged its own unsolicited proposal with the state government to extend its exclusivity arrangement beyond 2019 and expand the Star, which would torpedo Mr Packer's project.
Crown's push to increase its shareholding in Echo is now being viewed as an "insurance policy" to use to gain a foothold in the Sydney market if the government rejects its Barangaroo proposal.
In a statement on Friday afternoon, the ILGA chairman, Chris Sidoti, said the authority had approved Crown to be a "close associate" of the Star.
However, Mr Sidoti said further approval would be needed from the authority for any associate of Crown to become a director of Echo or hold a key executive position in the company.
Any proposal for a joint-venture casino between the companies would also require additional written approval.
The authority is also considering an application from another Echo shareholder, Genting, to lift its 5.22 per cent stake to as much as 25 per cent.
Frequently Asked Questions about this Article…
The Independent Liquor and Gaming Authority (ILGA) in NSW has approved Crown Limited, linked to James Packer, to increase its shareholding in Echo Entertainment up to 23% (Crown had applied to lift its stake from 10% to 25%).
ILGA capped the stake at 23% because a 25% shareholding would trigger change-of-control provisions in US securities that Echo issued last year, so the authority restricted the increase to avoid that outcome.
Yes. Crown still needs sign-off from other gaming regulators, notably the Queensland Office of Liquor and Gaming Regulation (Echo owns casinos in Queensland), and any associate of Crown becoming a director or key executive of Echo would require further ILGA approval.
The NSW approval is a significant step: Crown's increased stake is being viewed as an 'insurance policy' to secure a foothold in the Sydney market if its Barangaroo proposal is rejected, and it intensifies competition with Echo (owner of The Star) over exclusivity and expansion plans.
Mr Packer planned a VIP-only, high-roller casino as part of a proposed $1 billion hotel complex at Barangaroo. After the NSW government indicated that use of Echo's exclusivity licence for that purpose wouldn't be possible, Crown lodged an unsolicited proposal for a second Sydney casino licence after Echo's exclusivity expires in November 2019.
ILGA labelled Crown a 'close associate' of The Star, and the authority made clear that any associate of Crown seeking to become an Echo director or hold a key executive role would need additional approval; similarly, any joint-venture casino proposal between the companies would require further written consent.
Yes. The authority is also considering an application from Genting to lift its current 5.22% stake in Echo to as much as 25%.
Investors should monitor further regulatory decisions (especially from Queensland), Echo's and Crown's unsolicited proposals around Sydney exclusivity and expansion, any board or executive-approval applications, and developments on Genting's stake application—these factors could affect the competitive landscape for Crown, Echo and The Star.
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