March 21, 2018 / 5:54 AM / 4 months ago

Breakingviews - James Packer's exit deals Crown a better hand

SINGAPORE (Reuters Breakingviews) - Australian billionaire James Packer has resigned from the board of his casino group once again, this time for health reasons. He leaves the $7 billion Crown Resorts still recovering from a Chinese crackdown that left staff in prison and prompted a costly retreat. The path forward is clearer without him.

Australian billionaire James Packer, co-chairman of Melco Crown Entertainment, attends a news conference at Melco Crown's Studio City in Macau, China October 27, 2015. Melco Crown’s Hollywood-themed Studio City is the company’s third casino in the southern Chinese territory of Macau, the only place in the country where casino gambling is legal. Studio City represents a break from the other 37 casinos operating in Macau. It has no VIP baccarat lounges and will focus instead on mass-market casual gamblers, in a sign of the times for the world's largest gambling hub. REUTERS/Tyrone Siu

Crown, the world’s seventh -largest casino company, has had a difficult two years. Having bet heavily on Chinese high-rollers, it was badly hit by Beijing’s corruption crackdown, which targeted officials gambling embezzled money offshore. Crown staff, including its head of international VIP sales, were arrested in China in late 2016 for “gambling crimes” – it is illegal to market offshore gaming destinations within the country. The group then reversed its international strategy, scrapping Las Vegas plans and selling out of Macau-focused Melco Crown Entertainment.

The split with Melco and billionaire Lawrence Ho has proven premature. Macau is recovering and Melco shares have more than doubled from 2016 lows. The 34-percent stake Packer sold is worth $4.7 billion today - two-thirds of Crown’s market value. Crown received roughly $3 billion for the shares.

For Packer, the son of newspaper tycoon Kerry Packer, this is a second departure. He first left the board in 2015, then briefly returned. He cites mental health issues, showing a frankness unusual in business circles - even in Australia, where depression has been part of the political debate.

For the company, this is probably marginally positive. Operationally, the tycoon’s absence is unlikely to disturb a tentative recovery due to returning VIP gamblers. Its A$2.2 billion ($1.7 billion) Sydney project is progressing steadily, and debt has come down. And strategically, Packer’s vacillations have been unhelpful, including an attempt at taking the company private in 2015. Minority shareholders would benefit from clearer strategic direction.

His departure from the board is hardly the end of his influence: he retains 47 percent and directors include key allies like Chairman John Alexander, a long-time adviser. But Crown may play its current hand better without the noise.

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