Crown in War of Attrition, Says Echo Chairman John Story
Crown Ltd. (CWN) Chairman James Packer is waging a “war of attrition” to control Sydney’s only casino operator, Echo Entertainment Group Ltd. (EGP), its chairman said as the Australian billionaire seeks to oust him from the board.
Echo, which also has three casinos in Queensland state, won’t accept Crown’s nominee to the board and allow it to gain influence without paying, Chairman John Story said by phone from Sydney yesterday.
Packer, whose company is Echo’s biggest shareholder with a 10 percent stake, blamed Story for “a period of serious underperformance” and asked investors to remove him in a May 30 statement. Crown, with casinos in Melbourne and Perth, asked regulators for permission to increase its holding, spurring analysts at CLSA Asia-Pacific Markets, UBS AG and Macquarie Group Ltd. to speculate that Echo will become a takeover target.
“It’s corporate governance 101” not to let the nominee of a competitor onto Echo’s board, Story said. Crown is engaged in “a war of attrition designed to make life as difficult as possible for the board and the company until people get tired and hand over control without paying a premium,” he said.
Echo shares fell 0.9 percent to A$4.36 at the close in Sydney today after it announced A$40 million ($39 million) of writedowns to its full-year profit before tax.
Matthew Ryan, a Sydney-based analyst at JPMorgan Chase & Co., cut his rating on Echo to neutral from overweight after the company announced the charges.
Shares of Melbourne-based Crown fell 1.5 percent to A$8.35 while the benchmark S&P/ASX 200 index declined 0.3 percent.
Packer called for a special shareholders meeting in the statement last month and sought the appointment of Jeff Kennett, former premier of Victoria state, to the company’s board. Echo will hold the meeting July 20, the company said in a statement yesterday.
“Obviously if someone thinks they can extract better value than we can out of the assets, and are prepared to pay the required premium, we would engage,” Story said.
In a statement released after the market closed yesterday, Echo said it would write off A$29.9 million as a result of the liquidation of SilkStar Global Marketing Ltd., a company acting as an agent for high-rolling Asian gamblers, and would take a A$10 million charge as part of its cost-cutting program.
Those writedowns amount to 23 percent of Echo’s estimated profits before tax in the year ending June 30. The company is expected to earn A$177 million before tax, according to the consensus of 11 analyst estimates compiled by Bloomberg.
Trading “remained difficult” as weak consumer sentiment and demand crimped sales, with revenue excluding the company’s VIP business up 3.1 percent from a year earlier as of May 28, Echo said.
Packer’s shares in Crown, Consolidated Media Holdings Ltd. (CMJ) and Ten Network Holdings Ltd. (TEN) are worth $3.8 billion today, according to data compiled by Bloomberg. He did not immediately respond to a call left at his Sydney office seeking comment.
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