Crown strikes new deal with Cannery

Burswood Entertainment Complex owners, Crown, has struck a new deal for the Cannery casino group in the United States, which could result in Crown owning all or part of Cannery.

Crown said on Friday that it and the vendors of Cannery Casino Resorts – Millennium Gaming and an affiliate of Oaktree Capital Management – had terminated the USD 1.8 billion Cannery acquisition agreement of December 2007.

Crown said it had paid the vendors a USD 50 million termination fee.

“The parties recognised that the preconditions to completion would not be satisfied in time to allow the purchase as proposed to proceed,” Crown said.

“Crown and the sellers have also entered into further binding commitments in relation to Cannery.”

Cannery operates four casinos in Nevada and Pennsylvania and was to have been Crown’s first casino acquisition in the US.

Crown said that under the new arrangements, it could end up paying USD 370 million for a 24.5 per cent stake in Cannery.

The USD 370 million includes the USD 50 million break fee under the original deal.

Crown will also have an option over the next two years to acquire the rest of Cannery for about USD 1.4 billion.

Each transaction is subject to regulatory approval.

If Crown fails to obtain regulatory approval for the first transaction, it will pay the vendors a further termination fee of USD 200 million, bringing the total termination fees paid toUSD 250 million.

If regulatory approval is not granted, Crown will take a stake of just 4.1 per cent in Cannery for USD 40 million.

“Crown considers these new arrangements represent a satisfactory outcome for its shareholders,” Crown said.

“Crown is looking forward to working cooperatively with the Cannery team to continue to grow the business including the launch of the new Meadows permanent casino in Pittsburgh which is due to open in April 2009.”

Crown shares were up 69 cents, or 13.27 per cent, at AUD 5.89 at 12.45pm.

In February, the James Packer-linked Crown group reported a net loss of AUD 409.7 million for the first half of fiscal 2009.

The loss occurred after Crown made writedowns of AUD 547.5 million on its stakes in casinos in Canada, the US and the United Kingdom, which had been affected by the economic downturn in those countries.

Crown’s revaluations included a AUD 454.9 million writedown on minority holdings in the Fontainebleau, Stations, and Harrah’s casinos in the US.

Crown chief executive Rowen Craigie admitted at the time that Crown had agreed to buy Cannery “at the top of the market”.

Mr Craigie said in February that the Cannery casinos in Las Vegas were struggling against economic headwinds affecting the Las Vegas gaming sector, but the Meadows temporary casino at Pittsburgh in Pennsylvania, also part of Cannery, had strong revenue growth.

The original Cannery acquisition was conditional upon Crown obtaining gaming licences in Nevada and Pennsylvania.

It won approval from Nevada in January.

But the approval process hit a snag when James Packer’s sister, Gretel Packer, and three family trusts sought to withdraw from Crown’s gaming licence application before the Pennsylvania Gaming Control Board, saying that the process will breach their privacy.

Crown had said in February that it remained committed to completing the Cannery acquisition. (AAP)