Kerry Packer’s Publishing and Broadcasting Ltd empire is investigating potential casino acquisitions in the UK as it seeks to build on the success of Crown Casino.
PBL also expects to open its online casino – most likely domiciled in Vanuatu – for business in the new year.
A source close to PBL confirmed that the company was canvassing casino opportunities in the UK following the release of the Gambling Review Body report in July.
The Budd report recommended widespread deregulation of the UK gaming industry, which would place casinos on a par with their counterparts in Australia and Las Vegas. “Because of the possible changes that are going to take place in the UK, we’ve been looking at the UK,” said the source.
The report recommended increasing the number of poker machines allowed in UK casinos from 10 per venue to eight per table, with linked and unlimited jackpots. Casinos would also be permitted to broaden the activities they offer to include sports betting, bingo and live entertainment.
The PBL source dismissed speculation that the company was interested in buying London Clubs, which owns six casinos in London.
PBL has no desire to expose itself to the financial woes of Aladdin, the Las Vegas casino owned by London Clubs, which filed for bankruptcy at this month.
London Clubs’ value has plunged from 2 billion ($A5.74 billion) a year ago to just 19 million following the collapse of Aladdin.
Despite the large number of Asian high-rollers who travel to Vegas to gamble, the PBL source said the company was “not interested” in having a presence in that market.
Should the Blair Government agree to the Budd Report’s recommendations, the changes are not expected to have any financial impact on UK gaming operators until mid-2003.
ING Barings believes Stanley Leisure, which owns 30 casinos in the UK and Ireland and operates a sports betting website, could be the largest beneficiary of deregulation. ING estimates deregulation could boost Stanley’s earnings by 74 per cent. Stanley is capitalised at 316 million. Generating more than $400 million in free cashflow each year, PBL’s balance sheet would be able to support a debt-funded acquisition of up to $1.5 billion, according to stockbroker Deutsche Bank. PBL has adopted a low-risk investment strategy in the wake of the collapse of mobile phone company One.Tel. PBL lost $330 million when One.Tel went belly up in May. In July, Mr Packer told analysts and fund managers that his preference was to invest PBL’s high free cashflow in existing businesses operating in the gaming, TV or publishing sectors.
PBL is widely expected to make a Sg Online Casino acquisition to build on the success of its $1.6 billion takeover of Crown Casino. Crown Casino, acquired in late 1998, was the only PBL division in which earnings grew during 2001, as the advertising downturn took its toll on the company’s television and magazine businesses. Deutsche expects gaming to account for almost half the $512 million pre-tax earnings PBL is forecast to book this year.
Deutsche Bank believes future shareholder returns will be determined by how well PBL executes its investment strategy. PBL shares, after sinking to $8.15 following the terrorist attacks in the US, closed at $9.30 on Friday.
Some analysts said PBL’s appetite for acquisitions had abated in the wake of the US disaster.
To escape the Federal Government’s ban on online gaming, PBL plans to set up an Internet casino based in Vanuatu where the practice is legal. PBL has also considered establishing a casino off the coast of Taiwan.