Crown Resorts ‘change of heart’ opens way to casino start

Crown’s Sydney casino looks set to open by year’s end after deal with NSW regulator including cashless gambling and a bar on ‘junkets’.

The Barangaroo casino, where gaming is set to start by the end of the year. Picture: Gaye Gerard

Crown Resorts looks set to be able to open its $2.2bn Barangaroo casino in Sydney by the end of the year, but it won’t be business as usual.

Under sweeping conditions by the NSW gaming regulator, all casinos operated by Crown Resorts and Star Entertainment Group will eventually implement cash-free gaming and the use of international junket operators will be wiped out.

It means casino gaming will someday only be possible through identity-linked gambling cards in NSW, where Crown and Star operate the state’s two casinos, as well as in WA and Victoria as their sole casinos are operated by Crown.

At a press conference on Thursday chair of the NSW Independent Liquor and Gaming Authority Philip Crawford said he had noticed a “change of heart” at Crown Resorts and that “all the auspices” indicated the casino would open by the end of the year.

“I think we can assume that we are hopeful and confident that the opening of the gaming rooms will happen well in advance of the end of October,” Mr Crawford said.

Mr Crawford said Crown’s previous “adversarial behaviour” amid the Bergin inquiry, which ultimately found the company unsuitable to operate its $2.2bn Barangaroo casino, had made him unsure whether the company could be reformed.

But he said he was “pleasantly surprised” by the efforts of executive chairman Helen Coonan and even the co-operation of Crown’s largest shareholder James Packer, despite the Bergin report finding Mr Packer’s “deleterious” influence on the company was a key factor in its unsuitability.

To that end, ILGA has appointed an independent monitor to tell the authority once Crown had finished overhauling its culture, corporate governance and anti-money laundering regime, at which point the group may be deemed suitable.

In a statement Ms Coonan said she welcomed ILGA’s indication that “Crown’s reform implementation is well-advanced towards suitability to operate gaming at Crown Sydney.”

“It’s important to know we are well on track but I have assured the regulator there will be no complacency as we continue to embed the changes to improve our governance and compliance processes across the organisation,” she said.

However there are changes ahead for Crown and for the rival Star Entertainment Group, with the regulator saying agreements had been reached with the Crown to eventually “make all gaming in its casinos cashless with card technology linked to identity and a recognised financial institution” and to “not operate any international junket operations”.

Regulator Philip Crawford unveils the details of the Crown breakthrough. Picture: Joel Carrett

Crown Resorts said it would work with ILGA to evaluate the necessary steps towards the introduction of cashless gaming at Barangaroo.

In separate conversations, Star agreed to cease all international junket operations “and work with the Authority in moving towards cashless gaming.”

Star said the move to cashless operations would be “gradual”, with a timeline still be determined, but a spokesman said: “Customers are demanding alternatives to cash across all sectors and it’s inevitable gaming will move in the same direction.”

Crown Resorts shares fell through the day to close at $12.75, down 0.4 per cent, while Star slipped 2.71 per cent to close at $3.95.

Weak money-laundering controls and the exposure to organised crime through international gambling tour operators – or junkets – were other key criticisms of Crown in the Bergin report.

Last year Crown pledged to stop dealing with junket operators unless they were approved by state regulators and today Mr Crawford said he understood Crown had junked their VIP program “completely” despite Barangaroo’s ability to attract foreign high rollers key to the pitch Mr Packer made to the state government when seeking a casino licence almost a decade ago.

Crown Resorts has also agreed to pay a casino supervisory levy to the regulator retrospective to last July and pay $12.5m towards the costs of the Bergin Inquiry.

The company said the annual levy would be $5m in FY21 and FY22, with the rate beyond that time frame subject to further consultation.

Additionally, indoor smoking will be phased out in Crown’s Australian resorts by December 2022 and the complexity of the regulations comprising Crown and Star’s casino licences will be reduced.

Crown is also undertaking reform of its complex corporate structure and independently analysing its bank accounts for any signs of infiltration.

Mr Crawford also said he didn’t have any particular problem with Mr Packer retaining his 37 per cent stake in the company providing he didn’t exercise his shareholder power, in line with an agreement struck with Mr Packer’s shareholding company Consolidated Press Holdings (CPH) last month limiting their ability to exercise shareholder power.

“I think Mr Packer has some issues, I don’t care, I’m pretty neutral on that, as long as his influence is limited,” Mr Crawford said.

“Everything I hear tells me he is a seller but he might want to hang around if this is successful.”

Mr Crawford said this agreement could be extended once it expired and would apply if Crown Resorts was to be acquired by one of its suitors. Currently bidding for Crown are US private equity outfit Blackstone, listed Australian casino and hotel company Star Entertainment Group and investment giant Oaktree.

Helen Coonan’s reform efforts have “pleasantly surprised” the NSW gaming regulator. Picture: Adam Yip

On Monday Star proposed a merger to create the “BHP of gaming and entertainment,” offering each Crown Resorts shareholder 2.68 Star shares for each Crown share with a cash alternative equal to $12.50 per unit, subject to a cap equal to 25 per cent of Crown’s total shares on issue.

Separately, private equity group Oaktree has also proposed a $3bn line of credit should Crown Resorts choose to buy back “all or some” of Mr Packer’s stake in the company.

On Monday Blackstone bumped up its cash bid for Crown to $12.35 per share, maintaining it can achieve necessary regulatory approvals by the third quarter this year.

Mr Crawford flatly denied this was true, saying Blackstone’s global reach made approving it more complex, while its operation of a casino in Colombia raised questions.

“It’s going to take what it takes. They are a very big operation … and we need to know a lot about them,” he said.

He also said he had not examined The Star proposal but would sit down with it to work through it over “the next two weeks,” vowing it would not be a “tick or flick” exercise.

The revelations of the Bergin inquiry have led to the creation of two royal commissions into the company – one in Victoria to examine the activities of Crown Melbourne, and one in Western Australia to examine the activities of Crown Perth.

Mr Crawford said that if the inquiries, just underway, raised questions of contemporary misconduct, ILGA “would probably serve another notice about suitability.”

Mr Crawford said there had been “momentous changes” at Crown, pointing to the resignation of CPH’s nominee directors including Michael Johnston, Guy Jalland and John Poynton, as an example.

Independent directors Harold Mitchell, John Horvath and Andrew Demetriou have also stepped down, as did former CEO Ken Barton, whose approach to money laundering risks was described as “inexplicable” in the Bergin report.

Former SkyCity CEO Nigel Morrison has been appointed as a director while former SkyCity director Bruce Carter has been tapped to join the board, pending regulatory approval.

Mr Crawford said a third director was “in the wings.”

Mr Crawford said he approved of the gaming industry experience of these new appointees, but did not criticise newly announced CEO and former Lendlease boss Steve McCann for lacking experience in the area.

“I do understand that he’s got a lot of corporate experience, and they are going to need a lot to get through the next little while,” he said.