Star and Crown casino war over as peace breaks out
Star was seen as a big loser when Crown got the second Sydney licence. But John O’Neill and the Star board may have the last laugh yet.
Call it the modern day Sydney casino war, albeit minus the shooting.
It was recently the eight-year anniversary of the peak of the original war between Crown Resorts and Star Entertainment, the famous boat incident.
Billionaire James Packer, then desperately working on Crown gaining the second casino licence that would see it compete with the established Star at Pyrmont, famously hosted Star chairman John O’Neill and then chief executive John Redmond in the middle of Sydney Harbour on his $50m superyacht and allegedly offered to stay out of Star’s way in Brisbane if it “behaved itself” and he received support for his $2bn Crown Barangaroo in Sydney.
The claims were strongly denied by the Packer camp, but it triggered a five-month ACCC investigation during an ugly battle for Sydney that ultimately saw Packer triumph and Crown gain the second Sydney licence.
Relationships between the two companies, never particularly friendly, would sour as allegations and denials flew.
Barangaroo’s approval was Packer’s long-held dream come true and came after months of Crown outflanking Crown in the media and government relations stakes, as Star battled its own controversies that would see executives depart and the respected Matt Bekier take the helm in 2014.
Given all this there are ironies galore when we fast forward to the present day and the Star’s $12bn nil premium merger proposal that would see Crown shareholders receive Star shares and/or cash for their stock.
But this time the war looks like it will be between Star and Crown’s other suitor, US private equity giant Blackstone and its revised $12.35-a-share cash offer.
And, in a twist, Star needs to get Packer onside given he still accounts for 37 per cent of Crown’s shareholding.
Good for them, then, that word is that it seems Packer bears O’Neill and Star no ill will regarding what has happened in the past and is willing to contemplate their offer that would result in him taking some cash off the table and also sharing in the upside of a merged company of which he would remain as a large, though not controlling, shareholder.
That is, of course, another irony. Packer’s Consolidated Press Holdings was once a 10 per cent shareholder in Star back in the casino war days and had received regulatory approval to take that to 25 per cent.
There was also said to have been talks between Crown and Star way back when Tabcorp owned the latter, before it demerged the casino business in 2011.
So it would be a case of third time lucky should Packer give the green light to the current proposed deal. How things change.
It would be a stretch to say that in the end Star management did indeed “behave”, but relations between the two sides have improved markedly — as the fact that Packer is seriously considering the bid shows.
Competition from Crown has been good for them and Bekier has had a direct view of Crown Barangaroo from the window of his Pyrmont office to remind him of what he is up against as he improved Star’s Sydney assets and completely rejuvenated its Queensland operations.
Star also largely kept its own counsel and didn’t bag its rival when Crown struck trouble in China with the controversial arrest of its employees there in 2016, and then during the terrible time for Crown last year as the disastrous inquiry into Crown’s Sydney licence by the NSW Independent Liquor and Gaming Authority.
It saw Packer’s name dragged through the mud, Crown board members such as Andrew Demetriou and Harold Mitchell step down, and it was forced to open at Barangaroo without approval to operate its gambling assets. Star has not crowed or danced on Crown’s grave.
Now there is a scenario in which Crown and an emboldened Star would combine into a casino, entertainment and tourism powerhouse. To borrow an analogy from O’Neill’s favourite sport of rugby union, Star is a bit like the Queensland Reds winning the Super Rugby grand final on Saturday.
They were behind for a lot of the game, got a few fortunate breaks when a couple of Brumbies players were sent to the sideline for infringements by the regulator/referee, and then eventually won a scrappy contest after the final whistle and plenty of relentless scrummaging and driving plays near the try line.
It remains to be seen whether Bekier is the casino equivalent of Reds No 10 James O’Connor, choosing the right strategy at the right moment for the eventual winning score.
But competition, whether in business or sport, can be about survival. Star has persevered after those Sydney casino wars and suddenly looks like it yet could emerge with a famous victory.
It just needs Packer to play ball. Will he after all these years? Or will Blackstone, the All Blacks-style behemoth, come through and triumph in the end.
There’s plenty to play for, but Star is in the game. No one would have thought that a few years ago.
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