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The Australian casino (or gaming) wars have got to a whole new level. It's Packer's Crown VS Echo Entertainment in an almost 'State Of Origin' type battle for the bulk of Australia's land based casinos. One that will take place in a boardroom, rather than on a football field, but make no mistake - it's war.
A takeover war is hovering over the head of Echo Entertainment...the owner of Sydney's The Star casino...as James Packer yesterday made an audacious bid to be represented on the company's board.
The Star has been recently embattled in a scandal regarding inappropriate behaviour of a former director, so its all very interesting timing, and perhaps sees them in a weak position at the moment. Channel Seven is also planning follow up stories on The Star, and to Joe Blogs the casino does like a bit like a soft target right now.
Mr Packer's Crown yesterday fired off a missile more than doubling its stake in The Star's owner to the current 10 per cent maximum it is allowed to hold. Crown also applied to NSW and Queensland authorities for permission to go above the 10 per cent cap: prompting talk Mr Packer wants to in fact take over Echo.
This is understood to be the big move in plans to build a land based casino at Sydney's Barangaroo.
In paperwork sent off to Mr Packer yesterday, Echo Entertainment chairman John Story rejected Mr Packer's board bid.
Mr Packer told Rupert Murdock owned The Daily Telegraph he was "disappointed" in the reaction: "This is a good synergy for both companies, and today's rise in Echo's share price shows that the market thinks so as well," he said.
Mr Story's letter to Mr Packer stated in part: "The board believes that it is inappropriate for a Crown nominee to be appointed to the board as Crown is a competitor organisation. Accordingly, we will not agree to your request."
There have been some signs of an unhealthy business relationship between the two outfits in the lead-up to yesterday's announcement by Crown.
One source of tension has been Echo's constitution, which details a cap preventing any one party from having "voting power" of more than 10 per cent of Echo. Late last year, senior Packer advisor Guy Jalland let loose an attack on Echo's shareholder limit, describing it as a "poison pill" that was not in the interests of the company's shareholders.
Key sharemarket analysts have tabled that Echo Entertainment is one of the market's most obvious takeover targets because of its strategic value to Crown - already a giant in the gaming sector in the Asia Pacific region.
The theory was tested in Echo shares yesterday, which leaped up 50 cents to $4.30 on the understanding that Mr Packer would now move forward a takeover bid.
There was also speculation yesterday that Crown may be looking for a slice of Echo's high-roller VIP "whale" business. The Star has improved its performance in the "whaling" sector since its relaunch late last year.
Packer has torpedos and plenty of bait to snare in Echo. Echo's original "whales" will help with Packer's bottom line net profit, and further helps cement his place as one of the world's real big fish casino moguls. Echo is a touch on the nose at the moment, thanks to the scandal that rocked their boat and captain Packer and his loyal shipmates look poised to go in for the kill.
Will it be ships ahoy, fair winds or man overboard? Stay tuned as the Media Man agency continues to probe to probe the murky waters of the Australian casino wars.
James Packer planning $1.5bn casino investment...
Crown Limited plans to spend more than $1.5 billion on building new luxury hotels in Sydney and Perth, after boosting its investment in rival casino operator Echo Entertainment, Crown's executive chairman James packer advised The Australian Financial Review.
Mr Packer's plan to expand the Crown chain beyond Melbourne is part of a campaign to attract wealthy Chinese gamblers aka "Oriental whale VIP high rollers" to Australia's shores, he told the newspaper.
“Australia needs to have truly world-class hotels,” he said, acknowledging that regulators would probably raise competition concerns.
“I want to build one in Perth and one in Sydney to go with what we have in Melbourne. It puts these cities on the map."
Mr Packer's comments come after Crown spent more than $250 million lifting its stake in Echo, which owns The Star casino in Sydney, and Jupiters on the Gold Coast, to 10 per cent, from 4.9 per cent previously.
Echo rejected Mr Packer's call for representation on the company's board.
*the writer is an investor in Crown Limited, Network Ten and Virgin Enterprises
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