Crown's Packer places another bet on U.S. gaming market with Las Vegas buy
SYDNEY (Reuters) - Australian gaming mogul James Packer is taking another crack at the lucrative U.S. casino market, with his Crown Resorts Ltd buying a vacant site on the famous Las Vegas Strip in the latest sign of a resurgence of interest in the U.S. market.
Crown said it had established a joint-venture resort company to develop the site with former Wynn Las Vegas president Andrew Pascal, with financial backing from U.S. private equity firm Oaktree Capital Management.
The move is another attempt by Packer to gain a foothold in Las Vegas after he scrapped plans to build a resort there in 2008, and comes as analysts tip something of a turnaround in the sluggish U.S. gaming market.
While revenues in Macau, the only place in China where gambling is legal, now far outstrip Las Vegas, some analysts see the Nevada strip benefiting from a recovery in U.S. discretionary spending and a rise in international guests, particularly high-rolling Chinese gamblers who want to venture outside their own backyard.
"You can't be in the gaming industry and not have a special reverence for Las Vegas – that's where it all began," Packer said in a statement. "As we have built Crown Resorts into a thriving international company with successful casino ventures in Australia, Macau, and London, we've always kept our eye on Las Vegas."
Packer's renewed interest in Las Vegas comes after Genting Bhd, southeast Asia's biggest gaming group, said in May it plans to begin construction of a $4 billion resort on the strip in the second half of this year.
Australian gaming machine maker Aristocrat Leisure Ltd last month agreed to buy privately owned U.S. peer Video Gaming Technologies (VGT) for $1.28 billion in a deal that will help Aristocrat grow in the United States.
Crown paid around $280 million for a controlling interest in the 35-acre (14-hectare) vacant site, the former home of the famous Frontier Casino which was demolished in 2007.
The company said plans for the new development were still being finalised, but it expected to break ground in the latter half of 2015 and complete the project in 2018.
Brian Han, an equities analyst at Morningstar covering Crown, said Packer's latest venture into the bright lights of Las Vegas looked like it had more chance of succeeding.
"I think the choice of partner is pretty good," Han said. "Compared to the previous foray, I think this time, these parameters are much more different. Overall I think it's a pretty good deal."
Crown shares were down 0.9 percent at A$15.85 on a broadly lower market.
Packer scrapped plans to develop a $5 billion casino in Las Vegas with private equity partner York Capital Management in 2008 as the global financial crisis crunched the credit market, with Crown writing off A$44 million in the process.
Crown also lost money on investments in U.S. casino firms Fontainebleau Resorts LLC [FONSR.UL] and Cannery Resorts LLC [CANSI.UL].
"While we fell short in past attempts to enter that market, we now have the ideal opportunity," said Packer, the biggest shareholder in Crown, which jointly owns Macau casino operator Melco Crown Entertainment Ltd.
Han said Crown's balance sheet was stronger this time and the new site was in a prime location. Crown bought the land in a foreclosure auction after plans over the years to build a new version of the Frontier and then a replica of New York's Plaza Hotel on the site were abandoned.
"The previous development site was at the northern tip which not many people go to, relatively speaking," Han said.
Packer is ranked Australia's third-richest person with a fortune of $6 billion, according to Forbes. Last year, he cashed out of his family's publishing and broadcasting assets for about $1 billion to concentrate on his gambling business.
His growing gaming empire include multibillion dollar projects underway in Sydney, Manila and Macau. Crown is also planning a casino resort in Sri Lanka and together with Melco partner Lawrence Ho, Packer is positioning for a casino in Japan should the government liberalize gambling.
(Additional reporting by Thuy Ong; Editing by Stephen Coates)