Echo Entertainment Ltd. plans to invest at least A$1 billion ($960 million) to fend off Australian billionaire James Packer’s attempts to break the company’s Sydney casino monopoly.
The operator of the city’s Star casino and Crown Ltd., the gaming company controlled by Packer, have prepared rival proposals for developments on the shores of Sydney’s harbor, with the New South Wales state government saying it will approve only one project. Echo’s plan requires investment of more than A$1 billion, Chief Executive Officer John Redmond said in a television interview broadcast yesterday on Channel Nine’s “Financial Review Sunday.”
“I have nothing against Crown or nothing against James Packer,” he said. “This is really an investment in Echo’s future. It should be only one casino and one city.”
Melbourne-based Crown is seeking backing from the NSW government for a gaming resort targeting high-rollers at a development called Barangaroo, across Sydney Harbour from Echo’s The Star complex. Redmond didn’t provide details of his proposal in the interview on Channel Nine.
Shares of Brisbane-based Echo plunged 12 percent, the most on record, on May 24 after Crown sold its 10 percent stake in the rival. Crown said it wanted to end speculation over its intentions after analysts at brokerages including Nomura Holdings Inc. said the holding may lead to a takeover offer.
That slump helped extend Echo’s decline this year to 14 percent, cutting the company’s market value to A$2.44 billion. Crown has climbed 20 percent, swelling its market capitalization to A$9.36 billion.
Echo has already spent A$870 million on a multi-year renovation at The Star aimed at drawing more high-stakes gamblers. The company has yet to deliver the 14 percent targeted return from that investment, according to “Financial Review Sunday.”
“Although the return may not have been reached as quick as some were hoping, it is something that’s a realistic and achievable number, if not this year then next,” Redmond said in the interview.
Echo’s gaming license for The Star runs until 2093, with a guarantee it will be Sydney’s only casino until 2019. The long-term viability of the Star would be put at risk if its monopoly ends, Redmond said in April. The Barangaroo project won’t be completed until 2018, Credit Suisse AG has said.