James Packer’s Crown Limited has formed new alliances with powerful US gambling barons, spending AUD 414 million to buy stakes in the giant privately owned Harrah’s Entertainment and Stations Casino Group.
But an earlier plan to buy a prime piece of Las Vegas land and build the world’s tallest casino tower is under a cloud, with Crown’s partners reviewing their involvement in the project.
Crown Limited’s chief executive, Rowen Craigie, used the company’s half-year profit result yesterday to announce its 4.9 per cent stake in Stations Casino Group, worth AUD 242 million and bought in August, and a 2.5 per cent stake in Harrah’s, bought last month for AUD 172 million.
The delayed announcement angered some investors who argued that the company should have declared them when they were made, but the company said the stakes were not material.
The Stations Casino Group is owned by the Fertitta brothers, gambling scions, and the private equity firm Colony Capital, while Harrah’s was bought by the private equity groups Apollo Management LP and TPG Capital in January for USD 28 billion (AUD 30.5 billion).
The purchases were made with the final proceeds of a AUD 2.7 billion war chest from the split of Crown Limited from Consolidated Media Holdings last year. It follows two months after AUD 2 billion of this was spent on buying four casinos in Las Vegas and Pennsylvania.
Crown’s chief financial officer, Geoff Kleemann, said the investments were unlikely to produce earnings for a couple of years and were for the „long term“.
A portfolio manager at Perpetual Investments, Matt Williams, who manages a substantial shareholding in Crown, said investors were looking for more cash-producing bolt-on acquisitions, as the majority of the company’s other assets were still in the development phase. „It’s another minority investment. The market is never going to reward those investments until such time as they see the returns they [the management] are expecting.“
The company continues to make losses on its investment in its first Macau casino through Melco PBL, its joint venture with the Hong Kong-based Melco International, and expects it to stay in the red until after the huge AUD 2.4 billion City of Dreams casino is opened in March next year.
Crown posted a profit of AUD 211 million for the six months to December 31, which was above analysts‘ estimates, but was unable to be compared with the previous year because of the demerger of Crown from Consolidated Media Holdings.
Mr Craigie said both stakes should offer „potential future strategic opportunities“, but that Harrah’s, which has more than 50 casinos worldwide, would be a key ally in snapping up casinos around the world.
He said there were no further deals under negotiation with either company, but agreed that Harrah’s was looking for a partner with a licence to operate in Macau in order to develop a plot of land in the world’s fastest growing gambling market. Crown has a licence to operate in Macau, which it bought for AUD 1.2 billion in 2006.
Shares in Crown closed down 61c at AUD 10.99.