Three generations of the Packer family have enjoyed their status as influential media, business and gambling players in Sydney.
Whether it was Clyde Packer punching on with Ezra Norton at the races, Kerry Packer punching on with some thugs hired by Rupert Murdoch over a printing press or James Packer inviting Seven West CEO David Leckie to step outside to settle their differences, the family have always played an aggressive game with rivals.
James Packer’s audacious push for control of Echo Entertainment Group and construction of a second casino for Sydney at Barangaroo is the latest example of the family playing for keeps.
Australians are already the world’s biggest gamblers and after neutralising the Wilkie reforms, James Packer is now arguing Sydney should become the first Australian city to have two casinos. Talk about chutzpah.
It is almost 20 years since the Packers missed out on the Sydney casino licence to the Showboat-Leighton consortium because Kerry Packer refused to sharpen his pencil and lodge a decent bid.
At the time, Kerry was top of the rich list and very much accustomed to getting his way with politicians. He unleashed an almighty public campaign against Leighton claiming it was unfit to be involved courtesy of adverse findings from the Giles Royal Commission into construction industry tendering.
The likes of Alan Jones, Graham Richardson, Brian Powers and Michael Kroger were all actively involved, but then-NSW Premier John Fahey refused to overturn the independent tender process and litigation against the Casino Control Authority failed to secure the licence.
Leighton then went ahead and built a pretty crummy casino that never got anywhere near rivalling the extravagance of Crown’s $2 billion complex on the banks of the Yarra in Melbourne.
Whilst Kerry Packer had lost hundreds of millions of dollars punting at casinos, his first direct investment in a casino came when he took the entire Ord Minnett underwriting commitment for the Crown float in 1994.
He was also a major shareholder — along with Lloyd Williams and Ron Walker — in Crown’s original sponsor and manager, Melbourne property developer Hudson Conway.
However, Packer then cashed in right near the top in September 1996 when he sold a 15% stake in Crown for $204 million, retaining just 9.5%.
Just four months later — in January 1997 — the Packers announced a $342 million deal with Showboat to gain management control of Star City. However, this was abandoned in May 1997 to clear the decks for a Fairfax takeover bid which never materialised because John Howard failed to secure Senate support to water down the cross-media ownership laws.
Instead, PBL turned its attention to buying Crown in a $1.5 billion all-scrip takeover bid that was completed in early 1999.
The Crown takeover was driven by James Packer and it proved such a success that Kerry Packer agreed to pay more than $1.3 billion to buy Perth’s Burswood casino in 2002-03.
After Kerry Packer died in late 2005, James Packer sold PBL’s old media assets to private equity firm CVC for more than $5 billion thanks to Steve Fielding delivering that crucial Senate vote that allowed John Howard to change the media ownership laws.
A cashed up James then attempted to become a global casino player. The US and UK expansions were disastrous but the two casinos in Macau — including one that was built by the old enemy Leighton — were a great success.
Which bring us to the audacious 2012 play in Sydney.
Tabcorp was floated for $675 million by the Kennett government in 1994 and its first takeover came with the $1.8 billion acquisition of Star City Casino in late 1999, just after the Kennett government was defeated.
Tabcorp later also bought Queensland casino operator Jupiters and the NSW TAB before last year demerging its casino operations to create Echo.
Crown, which is now 46% owned by James Packer after some recent creeping, bought a 5% stake in Tabcorp before the demerger but has now doubled that to 10%, demanded an Echo board seat and applied for approval from the NSW and Queensland Governments to move to 19.9%.
James Packer had quite a scare during the GFC when Crown and his family company were caught with too much debt and commitments to buy, build or expand casinos.
Some of the US casino expansions were jettisoned and a fire sale of stakes in businesses such as Seek, Challenger and the pastoral holdings ensued.
These days, Crown is capitalised at $6 billion and only carries about $1 billion in debt. Echo is capitalised at $3 billion and also has $1 billion in debt, so an all scrip merger would create a business worth about $11 billion with eight casinos.
Packer appears reluctant to launch a cash bid for Echo, preferring the technique of his new mate Kerry Stokes in gaining control by creeping up the share register.
The Echo board was absolutely right to reject Packer’s board request, given that the two companies compete heavily for high-roller customers.
James Packer is effectively showing off his political credentials to the Echo board with the simultaneous campaign around Barangaroo, which would need to access to Echo’s exclusive licence until 2019.
However, having been rebuffed by Lend Lease, Clover Moore and now Paul Keating, he’ll need more than Alan Jones and Barry O’Farrell to get this second casino proposal over the line, especially after Echo comes to the end of its $750 million Star City expansion program and competes aggressively in the high roller market.
C’mon James, don’t be tight-fisted like your dad. Sharpen your pencil and make a decent full bid for Echo.
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