Steve McCann undecided about Crown future as he reveals plans to rebuild high-roller business
As Crown officially becomes Blackstone’s asset, current chief executive Steve McCann says he is yet to decide whether he will stay on to rebuild its high-roller business.
Crown Resorts’ chief executive Steve McCann says the company can build a more profitable international business, without cashed-up Chinese junkets and at half the number of overseas high-rollers it attracted previously.
But he is yet to decide whether he will oversee that rebuilding, saying he had not discussed his future with Crown’s new owner, US private equity giant Blackstone, which completed its $8.9bn takeover of the company on Friday.
The takeover ends James Packer and his family’s decades-long involvement with the company, after he was forced to sell down his 37 per cent stake following three bruising inquiries in three states that exposed how Crown facilitated money laundering and other organised crime.
James Packer’s tribute
Mr Packer said he was “pleased” that Crown has “moved into such safe and capable hands” under Blackstone, which also owns casinos in Las Vegas, Mexico, South America and Europe.
The firm has appointed former Las Vegas Cosmopolitan chief executive Bill McBeath as Crown’s new chairman, replacing Ziggy Switkowski.
The turnaround of the Cosmopolitan is one of Blackstone’s biggest successes. It bought the casino from Deutsche Bank for $US1.73bn ($2.5bn) in 2014, poured $US500m into a renovation and sold it for $US5.65bn last September.
“Blackstone is one of the world’s best property and investment firms and they clearly have seen the long term potential of Crown’s assets and operations,” Mr Packer said.
“It’s exciting to think of Crown’s next chapter and I am confident Blackstone will take good care of the company.
“I thank Blackstone for their vision, perseverance and faith in the business and wish them much success.”
Mr Packer also paid tribute to the company’s 20,000 employees and also Crown’s board – including former directors, many of whom resigned in the aftermath of the explosive NSW Bergin inquiry last year.
“To the employees, management and the board of Crown Resorts, past and present, it’s been an incredible honour to work with you and I will always look fondly on what we created together, particularly Crown Sydney,” Mr Packer said on Friday.
“There have been ups and downs and challenges, but today’s final sale to Blackstone, is confirmation that we have built one of the country’s best tourism, entertainment and leisure companies and I am extremely proud of that, thank you to everyone at Crown.
“I especially want to single out Ziggy Switkowski. He did an outstanding job for all shareholders.”
Blackstone’s takeover of the group seals the momentous task Mr McCann and Mr Switkowski faced when he joined the Crown last year following the resignations of former chief executive Ken Barton and executive chair Helen Coonan.
Shocking discoveries
Mr McCann had previously been chief executive at ASX-listed property titan Lendlease – a role he assumed during the global financial crisis in 2008.
Despite Crown’s troubles and misbehaviour being well publicised, he said when he joined the company he was still “shocked” at the level of the company’s misconduct.
“When the opportunity came I just thought ‘yeah, it looks challenging, but there’s always a solution to the matter of mapping out the pathway … and putting everyone in the right direction. So things happen rapidly. There’s no doubt about that,” Mr McCann said.
“There’s probably some things that came out early days that shocked me as much as anybody. But I sort of have a pretty clear view as to what success would look like and I thought it was achievable, but it hasn’t been a walk in the park.”
That success initially involved three priorities: ensure the company regained its suitability to hold a casino licence, bed down its reformation so that its new $2.2bn Barangaroo site could fully open and solve the question mark over its ownership. Now after 112 board meetings, he has completed those three objectives.
There is more work to be done, particularly in implementing identifiable chips and facial recognition technology to track movement across Crown’s casino’s and minimise financial crime.
“Realistically its three years plus before the technology is at a level that we need it to be,” Mr McCann said.
But whether he will oversee that work is not known. His employment contract includes a change of control clause, meaning he could reap an immediate payout of up to $9m, including $5m worth of long-term performance rights that vest under Blackstone’s ownership.
“We took a decision as a board not to allow any engagement with directors or my direct reports until after the second court date (to approve Blackstone’s takeover) to avoid any allegation or any perception of possible conflict,” he said.
“So it‘s really only been in the last week and a half we’ve allowed people to have that engagement. That process is underway now. And I’ll be sitting down with Blackstone as soon as the deal is complete, to talk about what our shared vision is, and what we’ll be doing is making sure that we have the right structure and the right people in the right roles to make sure the Crown can deliver on its commitments.”
The NSW Independent Liquor & Gaming Authority has enforced a raft of strict conditions the conditional approval it granted Crown to open Barangaroo’s gaming floor. Many of those conditions are commercial-in-confidence and Crown’s ability to adhere to them will form part of ILGA’s final determination on suitability when the conditional approval period ends in about 18 months.
No more junkets
Mr McCann said the new Sydney casino would form a test site for its rebuilt international business, which will scrap the controversial use of junkets, or organised tour groups that attracted high-rollers and exposed the company to money laundering and other crime, with some having links to Chinese triad gangs. Mr McCann was confident the refreshed international business could be more profitable than the controversial junket era.
“We’ve restructured our whole international premium player approach, and we’ve gradually gradually rebuilt that international client base, but we’re doing it in a very careful unstaged way,” Mr McCann said.
“When you reflect on the history of the junkets, the margins are less than 50 per cent of the margins we made in other parts of our business, and the bad debts were materially higher as well very difficult to issue bad debts in that space.
“If we get back to 50 per cent of the volume that we used to do, we’ll make a higher return than we used to previously using junkets. So we think about if we move back about half the size of the market used to be, we’ll do ahead and that won’t happen overnight, but we’re confident that it will happen over time.”
Mr McCann said rebuilding the international business will involve two phases, with all marketing to attract high-rollers completed in Australia.
“Phase one is where we are accepting inbound inquiries from limited jurisdictions like Singapore, New Zealand, for example. Phase two will broaden that out to a wider number of countries. Then we’ll move to a more proactive marketing face but we won’t have on the ground people.”
New habits
In terms of ensuring Crown does not relapse into its old ways, Mr McCann said the company had launched a significant program across its business to enhance its culture. He said most of the company’s 20,000 employees were doing the right thing every day, they just needed direction.
“The vast majority of those people are decent hardworking people. They just had the wrong direction and they weren’t given the opportunity they probably deserved.
“They do want to know that … they can speak up when things go wrong. That’s something that really has resonated.”
And he said the company would not tolerate those who “slow” the company’s reformation.
“Sometimes you’ve got to be perhaps a little bit more direct about those things and … you’ve got to be prepared to make the calls that sort of removes the layers that might end up being blockers. There are blockers in every organisation you got to make sure that they’re not slowing down your ambition.”
Alan Miyasaki, Blackstone’s head of real estate acquisitions for Asia said: “We are thrilled to become the new owner of Crown, bringing our expertise in hospitality to help the company achieve its full potential as a leading travel and leisure company”.
“We first invested in Crown two years ago, seeing the tremendous underlying potential of the company and its people.
“We look forward to working with the teams at Crown and applying our experience in owning and operating marquee hospitality brands around the globe with the highest levels of ethics and integrity to create something unique for employees, local communities, and visitors.”
Meanwhile Blackstone’s Australian head of real estate Chris Tynan said: “This is a great opportunity that plays to Blackstone’s strengths”.
“We look forward to supporting the local economy, creating jobs, and attracting visitors to Crown’s exceptional properties.”
More Coverage
Asian-backed property player snaps up Warriewood stake
The company is rapidly putting its stamp on the local property sector with a series of mall purchases.
Commercial property market picks up as deals soar to $6.2bn
Offshore investors, domestic institutions and private capital are back as the cycle moves past the bargain-hunting phase.