Terry McCrann: Other shoe drops as Packer takes time out from private investment company

AUSTRALIA’S most peripatetic billionaire James Packer can walk away from media ownership, but he just can’t walk away from his media genes, writes Terry McCrann.

AUSTRALIA’S most peripatetic billionaire James Packer can walk — indeed, he almost literally ran — away from media ownership, but he just can’t walk away from his media genes.

Having been soaked from birth in the reality and consequences of three generations of Packers before him at the very centre of media and influence in Australia — father Kerry, grandfather Frank and great-grandfather Robert — from the personal to the financial, Packer just can’t help generating headlines.

JAMES PACKER STEPS DOWN FROM CROWN RESORTS

MORE TERRY McCRANN

On Monday it was a combination of the two, personal and financial, with the news that he had resigned as a director of the Packer family’s private company Consolidated Press Holdings.

There was no announcement — as indeed there doesn’t have to be, only a notice to the corporate regulator ASIC — so there was no reason given; and Packer spokesman Mark Arbib declined to give one to Fairfax Media.

But it’s fair to say the reason was hiding in plain sight. In March he stepped down from the board of his publicly listed gaming group Crown. The official explanation was stated just as “personal reasons”.

But Packer had himself made public that his mental health was under strain. He was taking time out to get himself right. So on the most basic level his — presumably, or at least intended to be — temporary departure from the board of CPH is just the ‘other shoe dropping’.

Although it’s wholly owned within the family, the responsibilities of a director are exactly the same as those for a director of a publicly listed company like Crown. If he felt he couldn’t adequately discharge them as a director of Crown, the same applies to CPH.

The one clear thing you can say is that it shows Packer is taking both those responsibilities and his personal health seriously. He also had prepared both companies for his ‘time out’.

First, the reaction — more precisely, the muted reaction from investors in the only place you could publicly see such a response: trading in Crown.

Its share price closed unchanged on the day, demonstrating no sense of investor concern. Importantly, this is reinforced by trading over a longer time period, with investors showing greater confidence in what might be termed the ‘post-Packer Crown’.

That’s, ‘post-Packer’ in two very specific senses — since his departure from the board in March, yes; but also, critically, the much more ‘steady-state Crown’ he has left behind, partly by design and partly by default.

Then director James Packer leaves the Crown Resorts annual meeting last year. Picture: AAP

The Crown share price had been rising steadily from its low-point late last year; it stumbled after his March departure but had subsequently recovered all that ground with the broader strength in the market.

Interestingly, the exact opposite has been taking place with Crown’s prime competitor — Star Entertainment. After peaking at $6.38 in February, Star’s share price has fallen steadily to Monday’s close of $4.89.

This reversed a long trend in the opposite direction. From 2014 through 2016, the Star share price had almost doubled while the Crown share price had almost halved.

Broadly that reflected Packer’s grandiose global ambitions for Crown — its share in two billion-dollar casinos in over-casinoed Macau and plans to make a billion-dollar-plus return to the Las Vegas strip, where Packer had previously crashed and burned.

At the same time, Star was showing real progress in wresting serious high-roller ground away from Crown, which had long held a virtual monopoly on that market with its Crown casino in Melbourne.

This was underscored by the shock arrests of Crown staff in China — where the vast majority of global high rollers come from.

The positions are now very much reversed. Packer has pulled back to just Australia — selling out of both Las Vegas and Macau and, in the process, consolidated around the fabulously profitable Melbourne casino.

Thanks to the thoroughly bipartisan generosity of both the Kennett Liberal and Bracks-Brumby Labor governments, Crown has the most lucrative ‘grunt’ (poker machine) business in Australia. The same applies, if on a much smaller scale, at its casino in Perth — the only place in the state that has them.

That’s by design. The default consolidation bit was losing out in his attempt to break into Star’s Brisbane-Gold Coast monopoly.

It also meant that Star has now gone ‘Packer-like long’, with a multi-billion dollar spend across Brisbane, the Coast and Sydney.

Crown is now only long Barangaroo. So, that aside, it’s in a relatively ‘steady-state’ phase. Operationally, it can broadly run itself (as indeed, Packer has always left trusted staff to do). And there are no major strategic decisions pending or pressing — either political or business.

Out of the public eye, Packer had also been putting CPH on a ‘steady-state’ basis. The major task was to cut and consolidate the debt that funds the $4.4 billion shareholding in Crown.

It’s now a good time for a time out across the group.

It’s arguably also a good time for a time out in the broader senses — of where markets are headed over the next year or so; and where fresh opportunities might lie in a world that is both unprecedentedly volatile and presenting unprecedented opportunities.

INDEX BREAKS?

IS the index finally — finally — breaking away from 6000; thankfully, on the upside? On Monday it was pushing towards 6300.

The answer lies in Washington and on Wall Street — it’s in the gift of Donald Trump and (Fed head) Jerome Powell and ‘the smartest guys in the room’ (or at least, in their own minds) on two very different levels.

The first is the market reaction to what Trump does with the US economy and US trade policy and what the Fed does with interest rates and liquidity.

The second is what happens to the 21st century FAANG stocks — Facebook, Amazon, Apple, Netflix and Google. Where Wall Street goes, Australia — and the world — follows.

But don’t hold your breath for us to get back near, far less top, the 6800 or so pre-crash peak. Ain’t going to happen anytime soon.