Big investors back James Packer’s Crown Resorts exit
Crown Resorts’ biggest institutional investor, Perpetual, has thrown its weight behind the findings of the Bergin inquiry.
Crown Resorts’ biggest institutional investor, Perpetual, has thrown its weight behind the findings of the Bergin inquiry into the gaming giant and backed billionaire James Packer’s surprise decision to cut all ties with the Crown board.
Perpetual’s head of equities, Paul Skamvougeras, said the findings of the NSW Independent Liquor and Gaming Commission inquiry into Crown were welcome after the powerhouse fund manager had previously called for every Crown director to reconsider their position on the board.
“The recommendations in regard to board and management renewal are sensible and will significantly improve governance, risk management and culture within the company,” Mr Skamvougeras told The Australian.
It is understood Perpetual, which was in the market buying Crown shares on Wednesday to add to its 9.3 per cent stake in the gaming company, is supportive of Crown chief executive Ken Barton and director Andrew Demetriou stepping down from their respective roles following criticism of their actions in the Bergin inquiry report.
Perpetual has also been supported in its position by Anton Tagliaferro from fund manager Investors Mutual, which owns just over 2 per cent of Crown. The position of Crown’s 9.9 per cent shareholder, US private equity giant Blackstone, remains unclear.
Both Mr Barton and Mr Demetriou were said to be standing firm against calls for them to resign ahead of a scheduled Crown board meeting on Wednesday evening.
There is growing speculation Mr Barton could be replaced on an interim basis by former Sky City chief executive Nigel Morrison, a former Crown Melbourne executive who was appointed to the company’s board last week.
But Crown director Toni Korsanos is also being viewed as a potential interim replacement given she was previously the chief financial officer of Aristocrat and has strong relationships with investors and financial market players.
It is believed Crown chairman Helen Coonan, who met with ILGA chairman Philip Crawford on Wednesday afternoon, is also talking to two other potential independent directors who are interested in joining the board.
Perpetual’s Mr Skamvougeras also welcomed Mr Packer on Wednesday morning announcing plans for two of his three nominee directors to resign from the board of the gaming company immediately.
Mr Packer’s private company Consolidated Press Holdings, which owns 37 per cent of Crown, announced that CPH’s nominee directors on the board, Guy Jalland and Michael Johnston, would be stepping down. Crown announced shortly after that it had accepted the resignations.
A third nominee, John Poynton, has resigned his consultancy with CPH and will become an independent director.
It is understood Mr Poynton last year had discussed his board position with Mr Packer given the strong negative commentary in the Bergin inquiry about the negative impact of CPH’s influence on Crown.
His transition to an independent director had also been supported by several Crown shareholders, including Perpetual.
Welcome the move
“We welcome the move by the CPH nominees to resign from the Crown board,’’ Mr Skamvougeras said.
“This is a good outcome for minority shareholders, and paves the way for the Crown board to engage with ILGA and make the changes necessary to retain the Sydney licence.”
The decision of Mr Jalland to resign was surprising given Ms Bergin’s report had supported him remaining as a Crown director.
But a source close to Mr Packer said the decision of Mr Jalland, CPH’s chief executive and Mr Packer’s closest confidant, showed how far the billionaire was prepared to go to help Crown make itself suitable to retain its Sydney casino licence.
“CPH and Mr Packer now believe it is crucial that Crown chairman Helen Coonan and the Crown board have the opportunity to meet with ILGA to progress Crown’s announced reform agenda,’’ CPH said in a statement on Wednesday. “The issue of CPH’s representation on the Crown board, and future communications between those representatives and CPH, were potentially complex matters for ILGA and Crown to resolve. The steps announced today take them off the table.”
Crown last year scrapped special agreements with CPH that gave Mr Packer confidential information about its operations and allowed CPH executives to be paid to provide services to Crown.
The Bergin inquiry has proposed imposing a 10 per cent shareholding cap on any single investor in Crown, which could lead to Mr Packer selling down his interest or applying to the casino regulator for approval to maintain his holding.
ILGA chairman Mr Crawford stressed on Wednesday that the regulator would not seek to “boot” Mr Packer “off the share register”.
“We will find a commercial way forward, but things will have to happen, things will have to change. It is pretty obvious,” he said. He said Crown’s Barangaroo gaming floor could open as soon as April, even with Mr Packer as a major shareholder in the company.
ILGA denied Crown’s bid to open the gaming floor at Barangaroo in December, saying it would wait for the release of the inquiry’s findings, which were tabled in parliament on Tuesday.
Great news
Mr Crawford also welcomed the resignations of Mr Jalland and Mr Johnston.
“That’s great news. That means somebody is listening to us. It sends a big message to me and a big message to the media,’’ he said.
However, Mr Crawford said the casino industry had money-laundering issues “in spades” and said the days of self-regulation for Crown and the casino industry was over. The report also called for the creation of a new casino regulator in the state, but Mr Crawford said this was a matter for the government.
Crown shares fell as much as 10 per cent after they emerged from a trading halt on Wednesday morning, before closing 3.3 per cent lower at $9.81.
Ratings agency S&P Global placed Crown shares on credit-watchwatch negative on Wednesday, citing intensifying regulatory risks for the gaming giant.
“We consider that the NSW Casino Inquiry’s recommendations to the NSW gaming regulator that Crown Resorts and its licensee, Crown Sydney Gaming, are unsuitable to hold a gaming licence heighten the risk of permanent licence loss for Crown Sydney and its operations,” the ratings agency said.
“The recommendations present additional risks for the upcoming regulatory reviews of Crown’s established gaming facilities in Melbourne and Perth, which underpin the group’s cashflows and credit quality.”
S&P has placed its “BBB” long-term issuer credit rating and “A-2” short-term issuer credit rating on Crown, as well as its “BBB” issue credit ratings on Crown’s debt.
Additional reporting: Lachlan Moffet Gray, Jared Lynch
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