March 13 (Bloomberg) -- Billionaire James Packer today scrapped a $1.75 billion takeover of Cannery Casino Resorts LLC and sold his Australian cattle ranches to Guy Hands’ U.K. buyout company, Terra Firma Capital Partners Ltd.

Packer’s Crown Ltd., Australia’s biggest casino owner, rose by a record 13.5 percent in Sydney trading after calling off the deal to buy U.S.-based Cannery, which would have given it three Nevada casinos and the Meadows racetrack near Pittsburgh.

Packer, 41, whose fortune shrank more than half last year according to Forbes magazine, abandoned the takeover after the U.S. recession slashed gambling revenue and Crown lost 56 percent of its market value last year. Credit markets have frozen since the deal was struck in December 2007, making it more costly to finance takeovers.

“Anyone who is looking to borrow to buy an asset, particularly one whose value was set before the economic meltdown, has not been viewed kindly by investors,” said Sean Fenton, who manages about $324 million at Tribeca Investment Partners in Sydney. “Some investors have been waiting for a resolution to this deal before getting back into the stock.”

Crown shares rose 13 percent to close at A$5.90 in Sydney trading, the biggest gain since Packer split his gambling and broadcasting assets into separate companies, Crown and Consolidated Media Holdings Ltd. The stock was worth A$14.19 when it first started trading on Dec. 12, 2007.

The benchmark S&P/ASX 200 Index rose 3 percent today.

Pastoral Sale

The sale of Packer’s ranches, which have more than 300,000 cattle on properties that altogether would be bigger than the Netherlands, continue a breakup of the family business he inherited following the death of his father Kerry Packer in 2005.

Packer raised A$4.5 billion ($2.9 billion) in 2006 by selling a 50 percent stake in his media assets, including Australia’s biggest magazine publisher, to CVC Asia Pacific Ltd. He sold a further 25 percent to CVC for A$515 million in the following year.

Terra Firma agreed to buy a 90 percent stake in Consolidated Pastoral, the second-largest beef producer in Australia, for an undisclosed amount. The remaining 10 percent will continue to be owned by Consolidated Pastoral’s Chief Executive Officer Ken Warriner.

Consolidated Pastoral

“He didn’t have to sell, but he could see better places for his interest, to put his money,” Kerry Herron, founder of property valuer Herron Todd White, said. “He didn’t have the same interest in the land like his father had.”

Consolidated Pastoral was formed in 1983 when Kerry Packer, James’ father, bought Newcastle Waters Station in Australia’s Northern Territory. Its properties cover more than 5 million hectares (12 million acres) of land.

Hands, 49, built up Nomura Holdings Inc.’s buyout business in the 1990s before quitting and starting up his own company with Nomura’s backing in 2002. London-based Terra Firma’s assets include EMI Group Plc, the record label of the Beatles.

The Cannery deal was part of more than $3 billion of North American gambling-industry acquisitions Packer has made since inheriting Australia’s biggest fortune when his father died in December 2005.

Cannery is controlled by Bill Paulos and Bill Wortman’s Millennium Gaming Inc. and Oaktree Capital Management LLC.

Termination Fee

Crown will pay a termination fee of $50 million, which may go up to $250 million if it doesn’t get regulatory approval to call off the deal. The casino operator will also pay Cannery $320 million to subscribe for a preferred instrument that could be converted into a 24.5 percent holding.

Packer’s company will have the option over a two-year period to buy the rest of Cannery on the same terms as the original agreement, the gambling company said in a statement today.

Crown scrapped the deal less than a month after posting a first-half loss triggered by writedowns to its U.S., Canadian and U.K. casino investments.

Packer slashed the value of stakes in Harrah’s Entertainment Inc., Station Casinos Group and Aspinalls by 90 percent as recessions in North America and Europe curbed gambling demand.

To contact the reporters on this story: Robert Fenner in Melbourne rfenner@bloomberg.net; Madelene Pearson in Melbourne on mpearson1@bloomberg.net

Last Updated: March 13, 2009 01:51 EDT