Echo Entertainment Group Ltd., holder of Sydney’s only casino license, fell the most on record after rival Crown Ltd. sold its 10 percent stake saying it wanted to end speculation over its intentions.
Shares in the Brisbane-based company dropped 12 percent to A$3.03 at the close in Sydney, their sharpest drop since a June 2011 listing. Crown sold its 82.6 million shares at A$3.20 each, a 7 percent discount to their close yesterday, the Melbourne-based company controlled by billionaire James Packer said in a regulatory statement.
Crown and Echo have submitted rival plans to the New South Wales government for casino investments on adjacent stretches of Sydney’s harbor shore, only one of which will be allowed to go ahead. Crown took a 10 percent holding in Echo early last year, and the state government agreed in October to study its proposal for a hotel and casino targeting high-rolling Asian gamblers at the Barangaroo development site.
“Crown’s decision to exit its stake in Echo likely reflects an increased degree of confidence in its ability to secure Barangaroo,” Nick Berry, a Sydney-based analyst at Nomura Holdings Inc., wrote in a note to clients yesterday.
Crown’s board decided it should pursue the project “without speculation surrounding its Echo shareholding”, the company said in an e-mailed statement today. The proposed hotel is a “once in a life time project for our company,” Packer said in the statement. “Our objective and our ambition is to build the world’s best six-star hotel resort on Sydney Harbour.”
Crown will book a loss of about A$35 million on the investment, Nomura’s Berry wrote, based on the A$10 million gain in the shares’ value from A$254 million last March to A$264 million, set against about A$45 million in cash paid for new shares in Echo’s capital raising last June.
The rationale for selling now, rather than after the state government decides which casino application to grant, was “difficult to understand”, Mark Bryan, an analyst at Bank of America Corp.’s Merrill Lynch unit, wrote in a note yesterday.