THE DISTILLERY: Casino battle royal

Jotters referee the Echo vs Crown bid to transform Pyrmont, while one foresees the government cleaning up from increased competition.

Echo Entertainment Chairman John O’Neill has taken the fight up with Crown’s James Packer in the race for Sydney’s casino future. This morning Australia’s top business commentary brass looks at it from the point of view of a company that’s reasserting itself after a series of moves from a rival billionaire and a state government perhaps lucky for the unsolicited proposals or bereft of initiative.

But first we start with The Australian Financial Review’s Matthew Stevens, who reminds readers that O’Neill only took the chair last June following a string of poorly played hands by Echo. He set about immediately taking some ground back off Packer.

“The product of that urgency is a proposal shaped by Macquarie and PricewaterhouseCoopers that focuses very clearly on numerical demonstration of the mutual value that would be generated by sustaining Echo’s exclusive licence beyond the current expiry date of 2019. The central thrust of the submission is that with its licence securely ring-fenced, Echo could invest big-time in completing the transformation of its Pyrmont home into the fully integrated tourism precinct that Packer insists Sydney needs to secure a share of the future boom that will be triggered by the middle classing of China. Star Casino and its surrounds would be transformed under the Echo plan.”

This proposal is of course incompatible with Packer’s plans, which means the state government is facing a one-or-the-other equation. Fairfax’s Malcolm Maiden explains how that’s not a bad thing.

“Bidding tension tends to produce higher prices. In this case, they could be collected directly by the government in the form of higher licence fees or higher taxes on gaming revenue, or indirectly through project features such as the "local transport initiatives" New South Wales Premier Barry O’Farrell says Echo is foreshadowing in its proposal to construct a "globally competitive integrated resort" at Pyrmont. Whether bidding tension works for shareholders is another question. Concessions could squeeze the economics of the projects.”

So who’s the favourite to win this thing? Business Spectator’s Stephen Bartholomeusz says it’s not clear cut.

“It is a tricky decision for the government, given the importance it attaches to the development of the Barangaroo precinct and the glamour Crown’s proposed facility would bring to it, not to mention offshore high-net-worth tourists. While The Star has increased its international VIP gaming turnover, it is off a very low base. The government is, however, also planning to upgrade the rather tatty Darling Harbour precinct and therefore Echo’s promise to invest considerably more (it has just completed a near $1 billion upgrade of the complex) might be appealing. Whether it – and the proposed expensive overhaul of its Queensland properties – is quite as appealing to Echo’s shareholders, who pumped in more than $450 million of new equity last year, is less certain.”

But should the state government be more proactive about this? Fairfax’s Michael Pascoe certainly seems to think so.

"Just as Crown is trying to use the unsolicited proposal loophole as a way of gaining a casino licence through the back door, Echo is trying to cement its casino licence monopoly via a rear entrance.”

Meanwhile, Ten Network announced a nasty set of results less than a month after Hamish 'Hammer' McLennan took the chief’s seat.

The Australian Financial Review’s Chanticleer columnist Tony Boyd writes that chairman Lachlan Murdoch is excited about the potential of the former News Corp executive to turn the struggling broadcaster around. Meanwhile, The Australian’s Darren Davidson says the headline loss at Ten isn’t as bad as it looks when you take into account the $292 million non-cash writedown, $11 million restructuring charge and the lack of debt.

In other company news, The Australian’s Andrew Fraser says Billabong International founder Gordon Merchant might consider himself a surfer before a businessman, but watching his stake in the company go from over $900 million to $43 million constitutes an epic business wipeout.

Fairfax’s Elizabeth Knight points out rather simply that Opposition communications spokesperson Malcolm Turnbull is on strong ground when he hits the government for the delays to the National Broadband Network, but his claim that the Coalition’s proposal wouldn’t face similar problems isn’t so solid.

In other news, The Australian’s economics correspondent Adam Creighton welcomes the decision by Treasurer Wayne Swan to exit the residential mortgage-backed security market, arguing that it’s one of the lessons from the global financial crisis that you don’t mess with the property market.

The Australian’s Jakarta correspondent Peter Alford sheds some light on the legislative changes that could be coming to foreign ownership laws in Singapore, which has many investment banks concerned.

And finally, The Distiller simply has to point out this gem from The Australian Financial Review’s economics editor Alan Mitchell. From what we've read here, every commentary piece on the superannuation reforms has claimed the proposals aren't unlikely to be passed before the next election because there simply isn't enough parliamentary time.

Mitchell has another take on it that's brilliantly simple.

“A cabinet decision to impose the tax is all that is needed for the bureaucrats to include the projected revenue in the budget. If Abbott wants the money – and he certainly isn’t promising to repeal the superannuation tax – let him put the legislation through parliament if he becomes prime minister.”