James Packer-Backed Firm Grows Stake In Aussie Operator
In the latest casino-related finance news, The Australian has reported that Sydney-based investment advisor Ellerston Capital has now purchased additional shares in the local casino operator, The Star Entertainment Group.
James Packer, the owner of The Star rival firm Crown Resorts, is one of the main financiers of Ellerston Capital. In a recent document to the Australian Securities Exchange, The Star revealed that Ellerston has now increased its stake to 5.07% in total, with the investment company first buying the Australian gambling operator in March this year.
The firm later explained that it has shown interest in The Star as it was confident that the latter company would attract and take advantage of growing numbers of tourists from Southeast Asia and China in a financially lucrative way.
Crown Resorts Aussie VIP Market Setback
The VIP and high roller casino industry in Australia was severely impacted in the weeks and months following the detaining and sentencing of 19 Crown Resorts staff members in China for ‘aggressive promotion of casino gambling’.
Although The Star was not in any way involved in the case, the company was also impacted by the arrests as Chinese high rollers began to steer clear of the Australian market. However, Ellerston Capital is still confident that The Star will continue to grow in the future thanks to its strong growth strategies and capital investment schemes.
James Packer is the current holder of a 25% stake in Ellerston Capital which he owns through Consolidated Press Holdings, his private investment company. Additionally, Packer is also an investor in the Sydney-based investment manager – meaning that he has no say in how the latter firm approaches its rival operator, The Star.
Big Potential In The Star-Crown Merger
The news about Ellerston’s increased interest in the operator appeared just days after Genting Group sold its 5.62% stake in the firm for a $233 million consideration. Genting first showed its interest in The Star (then Echo Entertainment) back in 2012.
The Malaysian operator was rumoured to have wanted to acquire a 25% stake in the Australian company, but the process required from local regulators in order to be able to do this apparently dissuaded Genting from going through with the deal.
Genting’s exit from the local market quickly spawned theories that The Star and Crown Resorts may potentially merge. These reports have since been denied, despite analysts noting that a merger between two of Australia’s strongest casino operators could be a beneficial move for both parties.
Rohan Sundram, an analyst from financial advisory firm Citi, has estimated that a merger could generate over $110 million in yearly cost synergies. Sundram also noted that a conglomeration would gain a whopping 86% share in the Australian mass market, as well as over 90% of its VIP casino market.