Packer's audacious Echo gamble

For sheer corporate chutzpah in recent months, nothing compares to James Packer’s extraordinary play to install Jeff Kennett as Echo Entertainment chairman.

Crikey

After the mining and poker machine industries, aided by the Murdoch press, comprehensively pole-axed tax and regulatory reforms proposed by the Rudd-Gillard governments, Australia has entered into a strange Russian-like phase of crony capitalism.

Every other day there seems to be a new development as a small number of billionaires oligarchs use political and media connections to further their vested interests.

Rupert Murdoch wants an early election and no changes to media regulation. Gina Rinehart wants cheap foreign labour and less mining taxes and believes buying up stakes in influential media companies will help. James Packer didn’t want poker machine reform and wants an effective monopoly over Australia’s high roller casino market. He also wants more than $1 billion from News Corp for his pay-TV interests to help pay for this. The Murdoch, Packer and Rinehart interests have co-operated to take control of Channel Ten. Gina Rinehart’s Rich Lister mate and fellow Network Ten director Jack Cowin is even in the Murdoch press today arguing that the $29 billion woman should be given a Fairfax board seat.

Fairfax, of course, is the biggest and most reputable privately owned media conglomerate which would ordinarily be pointing all of this stuff out. Instead, it is under siege from the Rinehart cabal with the Murdoch press opportunistically delighting in its distress.

There’s been plenty of extraordinary chutzpah as this scene has unfolded over recent months, but nothing compares with James Packer’s extraordinary decision to requisition an EGM of Echo Entertainment group shareholders to remove independent chairman John Story and install his old political mate Jeff Kennett as a director.

On Monday, I lodged a 2500-word submission with the NSW Independent Liquor and Gaming Authority arguing that James Packer should not be allowed to increase his stake in Echo Entertainment above 10 per cent.

Part of the argument surrounded the question of probity by way of association. After all, James Packer is closely associated with the Murdoch family and News Corp and a UK parliament committee has declared Rupert Murdoch unfit to run a major international company.

One of the other arguments surrounded the Packer family’s dealings with Jeff Kennett when he was the Premier of Victoria and ultimately responsible for the regulatory environment around the tendering and development of Crown Casino.

These concerns were comprehensively spelled out in an 18,500-word essay first published on Jeffed.com in September 1999. Neither the Packer or Kennett interests have ever directly challenged this commentary for the almost 13 years that it has been published online.

It’s hard to know whether to laugh or cry on reading about the Packer-Kennett plan for Echo Entertainment, owner of casinos in Sydney, Brisbane, the Gold Coast and Townsville.

I was working for Kennett in 1993-94 when his government ran a supine and flexible regulatory regime around the tendering and development of Crown’s $2 billion edifice on the Yarra, which remains the world’s biggest casino complex in terms of size.

What was built bore virtually no resemblance to the winning tender. The size, design, manager and builder all changed after the tender had been awarded in what turned out to be a highly profitable exercise for the Packer family.

In arrogantly proposing Jeff Kennett as an Echo Entertainment director, James Packer is assuming that independent regulators in Queensland and NSW will approve Crown’s request to move about 10%. What about due consideration of all the submissions?

There’s also the small matter of Kennett being subjected to probity tests in Queensland and NSW, not to mention Crown’s obligation to the Victorian government to retain Melbourne’s primacy in casino tourism. So much for Kennett being a loyal Victorian! And all this is before we even talk about the question of minority Echo shareholders and the need for a full bid with an appropriate control premium.

We’ve been told on numerous occasions by The Australian Financial Review and The Australian how James Packer has been spending all this time with fellow billionaire Kerry Stokes and how impressed he is with those "control by creeping” tactics.

Yet these supposedly credible newspapers have not once pointed out that the Stokes creep on WA Newspapers turned out to be an absolute disaster for minority shareholders after the Perth-based billionaire backed his debt-laden television interests into the company, creating Seven West Media.

In performance terms, Seven West Media has been even worse than the grossly over-hyped Myer float. Packer – and Gina Rinehart at Fairfax for that matter – should not be allowed control without paying a premium to all shareholders.

And speaking of performance, Packer is making a big song and dance about the public company record of Echo chairman John Story. Hello James. Have you looked at the performance of the various public companies that enjoyed the services of Jeffrey Gibb Kennett as a public company director? Have a look at Data & Commerce Ltd and Sofcom for a start.

Perhaps Packer should stop listening to Crown’s government affairs manager Karl Bitar, the former chief conductor of Labor’s crumbling NSW Right political machine. Don’t these people realise how the HSU scandal has forever changed the world of "whatever it takes” deal making?

After paying Graham Richardson millions over the years, it doesn’t do Packer’s credibility any good to put another prominent former politician like Kennett on the payroll.

This story first appeared on www.crikey.com.au on May 30. Republished with permission.

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