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28 May 2010

Crown Casino VS Star City Friendly War; No Hostile Takeover, by Greg Tingle - 27th May 2010

The casino and overall gaming industry in the Asia Pacific - Australian regional remains as competitive as ever, with Crown Casino, Star City and Jupiters Hotel and Casino all enjoying expensive upgrades, some into the multi million range. To top it off, another proposed development, Jewel Casino, is earmarked for regional Victoria. This update comes in the week that the Australian Productivity Commission released its long awaited report into gaming and gambling. Media Man and Gambling911 take you to the battle zone, narrowing avoiding a dash of friendly fire...

Media and gaming buzz.... mergers, takeovers, acquisitions. How much is just talk and much is real? Speculation is a plenty.

Tabcorp and arguable its main prize, Star City in Sydney, has been the talk of takeovers for about a decade. In fact the late, great, Kerry Packer, Australia's first (legal) casino king, is understood to have stopped a young James (Packer) scooping it up in the early 2000s ... think circa 2003.

Insiders still see a Crown (other other co) takeover on the cards, but its unlikely to happen for a few more years.

Tabcorp is understood to send a release to the Australian Securities Exchange (former Australian Stock Exchange) noting rumours for a 7% jump in its shares.

Texas Pacific Group is touted as being a prime funding partner in any deal, due in part to its gaming - gambling sector smarts and know how thank to its ownership of the Harrah's Entertainment casino "super whale".

There are however too many complications for a deal to occur overnight, this week, or even this year, unless a miracle happens (which Packer is capable based upon recent stunning performances).

The group is starting a $350 million, give or take another 100 or 200 mil, redevelopment of Star. ROI, "earnings uplift" and other bean counter elements won't be clear for a few years, say the experts.

Also, keep in mind the X factor - Tabcorp's Victorian wagering licence, due to expire in 2012.

Packer's Crown aka 'World Of Entertainment' has its hands full between renovations, some tied to GenerationOne job development, and Melco Crown - City Of Dreams business, fighting it out for its share of "dolphins" and "whales" aka High Rollers. Unfortunately, just a normal catch of tuna, plankton and algae are not going to pay the bills. The business model factors in a certain number of "whales" and "super whales", and Team Packer is keen to see theme not drift off course to other potential competitors in the Philippines, downtown Mandalay Bay.

Melbourne and Sin City Sydney chit chat is suggestion that certain financial analysts advise Crown has put on ice its corporate development team, a move that "proves" that major acquisitions are not on the cards for multiple years.

Tabcorp comes at a heavy price, and a ocean liner full of debt. Think debt funding running into $1 or $2 billion, as a round figure estimate. Yep, these are big boys toys, with debt to boot. Insiders question if the debt could be handled, and worked into a deal, in the current financial market (which is close to terminal... stuffed, despite Prime Minster Kevin Rudd and Treasure Wayne Swan defending Australia's financial position).

Red tape, paperwork and legal eagles would have a field day should a pro active deal get on the way, and that's before any more regulatory changes take place.

Industry analyst's advise consent would need to be required from five state governments and about a bakers dozen of regulators.

As they say, never say never, but don't hold your breath.

To wrap up on a positive note, both Crown and Tabcorp are "swimming, not drowning", as is Not the case for much of the world's gaming and casino industry, with Las Vegas and Atlantic City suffering much of of the fallout.

Crown and Star are also adapting to the new media - internet landscape, and are plugging into the exciting and headline grabbing mainstream entertainment industry, to which will help lure in the masses who can afford to pay for quality entertainment, be it KISS, Kylie, Elton John, WWE, UFC, Dita Von Teese or other.

Australia may be known for 'Underbelly', but Crown and TAB are no mugs nor small time crooks. Smart operators they are, and they can accord to play the game and launch heavy fire when the time is right. You can bet that Gambling911 and Media Man will be there when heavy ammunition in unleashed. How friendly things remain is speculation, but punters, always remember, "A Friend In Need Is A Pest"... just kidding, "A Friend Indeed" or in debt!

Gambling911 and Media Man remind readers to bet with your head, not over it, and have fun.

*Greg Tingle is a special contributor for Gambling911

*Media Man http://www.mediamanint.com is primarily a media, publicity and internet portal development company.

*The writer owns shares in Crown Limited and Virgin and is a pro active member of Virgin Unite

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