“Too Big To Fail” – Crown, Oz Casino Giant Thrown Lifeline
The company, investigated for money laundering, exploitation of problem gamblers and underpayment of taxes at its three principal casino resorts in Melbourne, Perth and Sydney, has now been given two years to clean up its act.
Crown Casino Melbourne had engaged in “disgraceful” conduct for many years, a Royal Commission, headed by retired judge Ray Finkelstein, has concluded. And the company was deemed “unsuitable” to run its casino in the country’s second-largest city without oversight – although the commission fell short of pulling Crown’s operator licence.
The Royal Commission ruling followed the recent Bergin Report, which investigated Crown’s management and alleged involvement with organised crime at its proposed new Sydney casino — which has yet to open.
The probe ended with a similar summation of Crown as an “unsuitable” operator and the company was fined AUS$22.5 million for widespread infractions (£12.15m/US$16.1m/€14.26m).
Meantime, another official inquiry into operations at the Crown Perth casino continues apace in Western Australia.
Narrow Escape
Yet–despite the negative backdrop and charges of near-criminality–the market has reacted with relief to Crown’s narrow escape from tougher censure.
The company’s shares have surged by 13 per cent tops and Crown’s value has hit at least AUS$7 billion (£3.8bn/US$5bn/€4.4bn).
It seems the knock-on effect of a Crown collapse, with thousands of jobs across Australia at stake and likely impact on associated employment and supply chains, was too big to contemplate and Crown lives to fight another day.
“The reform programme was well and truly underway before I joined Crown,” said the company’s “new broom” CEO Steve McCann. “And we have invested a lot of time and effort since then to continue on that path.
“I firmly believe the business has turned a corner and has been materially de-risked over the last six months. We have seen significant progress on our remediation plan.
“We’ve had a significant overhaul of the senior leadership and board. [And although] we’ve had continued challenges through Covid-19 in terms of lockdown, today we have all three resorts open and operating.”
Crown Sydney, currently open for non-gaming activities, will restart gambling action in early 2022, said McCann.
For its part, Crown’s Melbourne casino will now be supervised by a government-appointed manager for the next two years.
The manager will have wide powers to drive renewal and reform of the business, will be able to veto board decisions and will have open access to the casino’s accounts and records.
Packer Biggest Loser
Smelling opportunity, private equity firm Blackstone have launched an AUS$8.46 billion takeover bid for the wounded Australian gambling behemoth (£4.57bn/US$6.05bn/€5.36bn).
But Crown has rejected the initial offer and invited Blackstone to up its bid.
Perhaps the biggest loser from the Crown crisis is Australian billionaire James Packer, who owns around 36 per cent of the company.
The Victoria State inquiry–also drawing on the Sydney investigations– found Packer’s influence over the Crown board had “rather disastrous consequences” for the company.
Finkelstein’s Royal Commission report went on to recommend that no individual shareholder should own more than five per cent of any casino operator.
Effectively, this means that Packer’s private investment company has until September 2024 to reduce its stake in the Crown group.
How the mighty have fallen.
Just five-years-ago Crown had a network of casino, entertainment and property assets stretching from Australia to Macau and Las Vegas.
Today it’s facing an uncertain future.
