Echo Set to Lose Sydney Gaming Monopoly

Online, July 9, 2013 (Newswire.com) - Echo has been dueling with Crown, the gaming resort operator controlled by the billionaire James Packer, for the right to develop new leisure and gaming facilities in Sydney, Australia's biggest city, that target high-rolling Asian clients.

Echo put forward a proposal to spend A$1.1bn expanding its existing Star resort with two new hotels. It also offered to pay A$250m for a 15-year extension to its gaming license that expires in 2019.

A panel appointed by the government of New South Wales on Wednesday chose Packer's 60-storey Crown Sydney resort to proceed to the third stage of a special approval process. Packer believes he can boost visitor numbers to Australia by attracting wealthy Asian tourists to luxury gaming resorts.

"The decisive factor was the opportunity to introduce competition into the market," said Barry O'Farrell, premier of New South Wales. "The independent steering committee found a competitive gaming market would deliver increased tourism and broader economic benefits for the state."

The independent commission found Crown's resort, which would cost more than A$1bn to develop, would generate almost A$450m in extra economic activity for the state and create 1,250 jobs.

"Sydney is one of the world's greatest cities; it deserves one of the world's great hotels. I want this building to be instantly recognizable around the world and feature on postcards and memorabilia promoting Sydney. That's how you attract international tourists, create jobs and put Sydney on the map," said Packer.

Packer built a 10 per cent stake in Echo in an attempt to pressure the company into splitting its Sydney gaming license and doing a deal with Crown. But he dumped the stake in May at an estimated loss of A$35m, a move that suggested Crown was increasingly confident of winning backing for its plan.

Following the sale, Genting, the Asian gaming group owned by KT Lim, increased its holding in Echo to 6.6 per cent. Genting has also applied for regulatory approval to lift its holding in Echo beyond 10 per cent, a move that has prompted speculation of a takeover.

Mr. O'Farrell said Packer's plan would now move to stage three of the approval process, provided Crown agreed to an upfront payment of A$100m and a number of other conditions, including a guarantee that license-fee and gaming-tax payments exceed more than A$1bn in the first 15 years of operation.

Shares in both Crown and Echo were suspended ahead of the announcement by O'Farrell.

Shares in Crown rose 3.7 per cent to A$12.67 as they resumed trading on Friday, while Echo, which also returned from suspension, fell 4.9 per cent to A$2.76.

Andrew Levy, analyst at Macquarie Securities, said the decision by the state government to back Packer's project was a blow to Echo because it would result in greater competition in the local market.