Is James Packer making a run at Star Entertainment?
It wouldn’t be the first time.
The gaming and media tycoon owned as much as 10 percent of his principal Australian rival a few years back when Star was known as Echo Entertainment and the two were jostling to control the future of the Sydney and Brisbane markets.
Now Ellerston Capital, a fund in which Packer owns a 25 percent stake, has snapped up more than 5 percent of ASX 100-listed Star.
Ellerston already owned a piece of Star, after buying into it in March, and has upped it in the wake of Genting Group’s sell-off of its holding in the operator.
The Genting conglomerate, whose casino investments range from its home country of Malaysia to Singapore, the Philippines, the U.S., the UK and the Bahamas, had bought 9.7 percent of Echo back in 2012, and sold its remaining 46.4 million shares in the operator earlier this month. The block trade, representing around 5.6 percent of the company, went off at A$5.07 a share, totaling $235.2 million (US$181.9 million) of which Genting netted $67.5 million.
News reports identify investment group Perpetual, not Ellerston, as the main buyer, and Packer, in any event, is a passive investor in Ellerston, which he retains through his privately owned Consolidated Press Holdings. That said, analysts have begun crunching numbers on an independent move on Star through Packer’s Crown Resorts and they see enormous potential benefit for the tycoon’s ASX-listed gaming arm.
Citi analyst Rohan Sundram acknowledges that while talk of a tie-up is “merely speculation” it would sizably enhance Crown’s operational scale and market share and vastly improve its growth prospects.
Debt has been a problem for Crown and has moved it to sell out of its 10-year partnership with Lawrence Ho in Macau and recently to jettison involvement in a planned luxury resort on the Las Vegas Strip. Political opposition derailed a planned resort in Sri Lanka designed to cash in on the lucrative India market, and last year, with the company struggling to grow revenues at its flagship destination in Melbourne and sister resort in Perth, when its entire China marketing team was arrested.
Star, meanwhile, is enjoying a resurgence under new management, investing heavily to remake and expand its flagship casino hotel of the same name in Sydney?where Packer is committing billions to build a competing tables-only VIP destination just across Darling Harbour?and besting Crown in the bidding to join a $3 billion mixed-use entertainment and resort complex in the Queensland capital of Brisbane. Star also is pouring up to $500 million to remake its gaming resort on the Gold Coast with help from its Brisbane partners, which include Hong Kong-based retail and property conglomerate Chow Tai Fook Enterprises.
Certainly, Ellerston is happy with its investment. “We see solid growth prospects for Star, driven by its capital investment program and growth strategy,” the fund said.
Speaking with The Australian, Sundram said a Crown-Star combination would control some 86 percent of domestic mass-market revenue and 90 percent of VIP revenue. The cost synergies alone could total A$100 million (US$77.4 million), he said.
