Echo Unveils $1 Billion Sydney Casino Extension
Echo Entertainment Group Ltd. (EGP), licensed to run Sydney’s only casino until 2019, plans to spend more than A$1.1 billion ($1 billion) expanding the property to fend off a challenge from billionaire James Packer’s Crown Ltd. (CWN)
The proposed extensions to Echo’s harborside Star casino include two new hotels and more than 50 bars and restaurants, the Brisbane-based company said in an e-mailed statement today. Echo also proposes making a A$250 million payment to the New South Wales government to extend its exclusive casino licence, it said. This comes after Packer last month unveiled rival plans for a A$1 billion hotel-casino project at Barangaroo, a development site southwest of the Sydney Harbour Bridge.
Crown and associates of Lim Kok Thay’s Genting Bhd. (GENT) have made rival investments in Echo since February 2012, amid competition for high-rolling Asian gamblers who’ve doubled Macau’s gaming revenues over the past three years. Echo also submitted an alternative proposal to the NSW government supporting the Barangaroo development, provided that gaming facilities are VIP-only table games, it said. Under this scenario, Echo will not make the A$250 million payment because of the fragmentation to the gaming market.
“While Echo is confident that our proposed development plus licence exclusivity payment provides the most impactful solution, this alternative may be seen as a potential win-win scenario for the people of Sydney,” John O’Neill, the chairman of Echo, said in the statement.
Crown sold out of its 10 percent stake in Echo last month so it could pursue its own plans “without speculation” over the holding, the Melbourne-based company said. Genting Hong Kong Ltd. (GENHK) is still awaiting regulatory approval to lift its share to 25 percent.
“Barangaroo is likely to be a formidable competitor to Star if Crown’s proposal is approved by the New South Wales government,” Larry Gandler, an analyst at Credit Suisse Group AG, wrote in a note to clients May 24.
Echo unveiled its plans today after submitting them to the NSW government for a June 21 deadline. Only one of the rival casino plans will be put forward to the final stage of a three-stage approval process being run by the state.
Echo suffered its sharpest drop since it was spun off from Tabcorp Holdings Ltd. (TAH) in 2011, after Crown sold its 10 percent stake even after winning approval from regulators in NSW and Queensland states to lift the holding to as much as 23 percent. The move reflected “an increased degree of confidence” that Crown would win permission to build Barangaroo, Nomura Holdings Inc. analyst Nick Berry wrote May 23.
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