Inside Asian Gaming

August 2012 | INSIDE ASIAN GAMING 45 Briefs on a casino later, the uncertainty could complicate the company’s efforts to finance the project. In June 2011, Melco Crown signed a $360 million deal to gain control over the Macao Studio City project, resolving a bitter dispute between the project’s earlier partners that had escalated to the Hong Kong courts, stalling development for years. New Cotai Holdings LLC, an arm of U.S. investment firms Oaktree Capital Management L.P. and Silver Point Capital L.P., retained its 40% stake in the project. A source familiar with Melco Crown’s negotiations with the government told Portuguese-language Journal Tribuna de Macau that “everything indicates there will be a casino at Studio City”. The source did not elaborate, however. Meanwhile, English-language Macau newspaper Business Daily reported: “The latest gazette entry mentions a five-star hotel and tourism facilities. There are other projects in Macau where that has been used as the basis for including a casino.” Echo’s New Chairman Open to Joint Venture With Crown According to an article in the Australian Financial Review Echo Entertainment Group is open to James Packer’s plan to establish a joint venture servicing the international high rollermarket inAustralia should the billionaire’s Crown Ltd lift its stake in its rival to 25%. The AFR reveals“that the VIP joint venture plan has been discussed informally between senior figures at the two companies, with Echo indicating that it is open to co-operation in a market where both companies face increasing competition from Asian rivals.” The tie-upwould only be discussed in detail after Crown increases its stake in Echo from 10%, as it has sought regulatory approval to do, according to one source with knowledge of the matter. No formal discussions have taken place and no proposal has been presented to Echo, although both sides have expressed interest in the prospect. A joint venture in the Australian VIP market, which caters largely to well-heeled gamblers from across Asia, would align Crown and Echo’s interests in the only space that they currently compete in. A deal would also pave the way for co-operation on a new luxury hotel and casino at Sydney’s Barangaroo, where Crown has commenced talks with developer Lend Lease despite Echo holding the monopoly casino licence in Sydney. Given Echo’s casinos in Sydney and Queensland do not compete with Crown’s in Melbourne and Perth, it is understood that a joint venture in the VIP market could also remove Echo’s objections to Mr Packer appointing a nominee to its board. The willingness of Echo’s new chairman to engage with Crown and Genting Group is an about face after the public spat between his ousted predecessor John Story and Mr Packer. Mr Story declared he would “never” allow a competitor such as Crown on to the board, a stance that saw his rival run a ferocious media campaign against the chairman that ultimately succeeded in unseating Mr Story in June. Mr Packer was unsuccessful in his attempt to appoint a director to the Echo board at the same time, but a joint venture agreement on VIPs and a 25% holding in Echo is expected to resolve the issue. New Echo chairman John O’Neill has also reached out to competing investor Genting, which emerged as the surprise owner of a holding of just under 10% in Echo in early June, and like Crown has applied to the NSW and Queensland governments to increase its stake beyond that level. Advisers and representatives of the Malaysian conglomerate, including Mr Lim, have met with Mr O’Neill and Echo chief Larry Mullin on two separate visits to Sydney over the past two months. Mr Lim’s entourage spent several nights at Echo’s flagship casino, The Star, in Sydney, and Brisbane’s Treasury casino, holding meetings as well as gambling and assessing recent renovations, according to sources. Despite the contact, Echo’s management has no insight into Mr Lim’s plans concerning the Australian company, according to one source who described discussions as “extremely careful and cautious but definitely calm and non-hostile”. The idea of an alliance over high-roller gamblers between Crown and Echo is not new. As the two dominant casino owners in Australia, Crown and Echo’s former parent Tabcorp had explored options for joint marketing and other forms of co-operation in the VIP market, though they have never struck a deal. Combined, the two control less than a 3% share of the VIP market across the Asia-Pacific, and both are now looking at ways to increase Australia’s standing in the region and overcome natural disadvantages including the distance to gamble here compared to Macau and Singapore. Waiting on a casino—the Macao Studio City site On the hunt—Crown Ltd