CORRECTED - Genting lifts stake in Australia's Echo with $83.5 mln buy

Any bid would set up a battle with Echo's largest shareholder, rival casino company Crown  which has a 10 per cent  interest in Echo, the maximum allowed by Echo's constitution, and has applied to regulators to be allowed to increase its stake.

The speculation came as Echo's chairman, John Story, quit the board after the company conceded that a campaign by Crown to oust Mr Story, which claimed that Echo's casinos had underperformed under him, was damaging the company.

Echo's shares closed 4.4 per cent  higher today, at $4.49, after Genting Singapore's stake was revealed. Australia's benchmark S& P/ASX 200 closed down 1.1 per cent.

A spokeswoman for Genting Singapore declined to specify the size of the stake it had or disclose when it was acquired, but sources told  The Australian  the company  had acquired 4.9 per cent  of the company. 

Genting Singapore owns Singapore's Resort World Sentosa and has plenty of firepower after raising over $S1.8 billion earlier this year, saying in April that it had no immediate plans for investments but would look at new projects and acquisitions.

Analysts at Macquarie said Genting Singapore's move on Echo could be a precursor to a takeover, which made strategic and financial sense, especially when considering the big-spending VIP market.

" We believe that Australia is a market that has not well penetrated the Asian VIP market and this could present Genting Singapore with substantial revenue synergies given its extensive database of VIP clients regionally," they said.

The analysts said Genting Singapore could pay up to $6.50 a share for the company, valuing it at up to $4.47 billion, and still see the acquisition being earnings and return accretive.

Another analyst, Ben Brownette from Commonwealth Bank of Australia, told  Dow Jones Newswires  that while a takeover could make sense based on the VIP operations, questions remained whether regulators would lift the 10 per cent  ownership cap on Echo for Genting Singapore.

Echo owns Sydney's The Star casino and has casinos in Queensland, while Crown owns Melbourne's Crown casino and Perth's Burswood casino.

Echo's chairman had faced a resolution from Crown to be dropped from the board, which was due to be voted on at an extraordinary general meeting on July 20 until the board advised him against contesting the resolution.

Crown said in a statement that subject to further discussions with Echo it no longer intended to pursue the EGM.

" Our shareholding in Echo is a material investment for Crown and we look forward to having discussions with Echo and exploring opportunities to work together to create value for all shareholders," it said.

A spokesman for Echo was unable to be reached for comment.

Echo said in its statement that Mr Story believed that the resolution to remove him should have been determined by all shareholders at a vote, but accepted the board's view.

Mr Story's position came under intense pressure last month when Crown called for the EGM and Mr Story's removal and followed up with an advertising campaign saying the company's casinos had underperformed under Mr Story's chairmanship.

Crown's moves have been widely seen as key tocChairman James Packer's plans to build a new hotel and casino  in Sydney. Echo holds an exclusive licence to operate casinos in New South Wales until 2019.

Crown, which has operations in Macau through its Melco Crown joint venture with Melco International Development, is also seeking to have former Victoria state premier Jeff Kennett appointed to Echo's board.

Mr Story said in a statement last week that Crown's moves were a desire to gain control of Echo's licences without paying a premium to shareholders.

Echo said it has appointed Australian rugby union boss John O'Neill as acting chairman.

- Chun Han Wong in Singapore contributed to this article. 

 

 

 

 

 

MELBOURNE/SINGAPORE - Singapore gaming operator Genting said it has taken a stake in Australian casino operator Echo Entertainment, just as Echo's chairman unexpectedly resigned to avoid a damaging vote called by billionaire rival James Packer.

Analysts speculated that Genting was preparing for an acquisition, having built up a war chest of S$3.9 billion, and said Echo's casinos were in cities where Genting had attempted to win licences in the past.

A Genting spokeswoman declined to give the size of the stake but said the value of its investment is S$298 million. The Australian newspaper said earlier that Genting had built up a 4.9 per cent stake in Echo, which runs casinos in Sydney and the Gold Coast of Australia.

Echo said separately that its chairman, John Story, has resigned, bowing to a destabilising campaign run by Packer who owns a rival casino operator and wanted to sack the chairman.

Shares of Echo jumped more than 4 per cent in morning trade.

Packer wants to boost his company Crown Ltd's 10 per cent stake in Echo and win a board seat. Crown put forward a resolution to remove Story at a July 20 shareholders meeting.

Echo said in a statement on Friday that Story wanted the shareholders to vote on his position, but accepted the board's view that he should resign ahead of the meeting.

" The board of Echo has formed the view that the ongoing disruptive campaign concerning the resolution proposed to be put to an Extraordinary General Meeting of Echo for the removal of Mr Story was damaging to the company, and that it was in the best interests of shareholders that Mr Story not contest the resolution," Echo said.

Packer, who has stakes in casinos in Australia, London and Macau, wants to use Echo's Sydney licence to build a new hotel and casino complex in Sydney to attract more Asian high-rollers.

A full takeover would cost more than A$3 billion ($2.98 billion) and Packer would face tough regulatory scrutiny.

" Story is going more like a soap opera. The money in this saga is with Genting being on board," said Richard Colqhoun, a portfolio manager at Antares Capital, which owns shares in Echo.

Genting, which has casinos in Singapore, Malaysia, the Philippines, England and the United States, knows Australia well, according to The Australian. It was a founding shareholder in the Burswood casino in Perth, which is now owned by Packer's company Crown.

Perpetual Investments, Echo's second-largest shareholder after Crown, does not intend to support Crown's push for a board seat, a senior executive told the Australian Financial Review.

" Perpetual does not support Crown's move to appoint a director to Echo," Perpetual head of equities Matt Williams told the newspaper.

Shares in Echo topped the gainers in a broadly weaker S& P/ASX 200 Index, rising as much as 4 per cent to value the company at around $3 billion.