Genting takes stake in Australia's Echo

MELBOURNE: 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 percent 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 percent in morning trade. Packer wants to boost his company Crown Ltd’s 10 percent 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 percent to value the company at around US$3 billion. - Reuters