Though the moves happened a couple of months ago, shareholders and analysts are just finding out about $414 million worth of minority investments that Crown Ltd. made in both Harrah’s Entertainment and Station Casinos.
The moves are part of a larger strategy that Crown - owned by billionaire James Packer, son on the late Australian media magnate Kerry Packer - is undertaking to expand its gaming business to Las Vegas and other U.S. markets. Crown paid $242 million for a 4.9 percent stake in Station Casinos and $172 million for a 2.5 percent stake in Harrah’s. Both investments were made in December as Crown was signing documents to acquire Las Vegas-based Cannery Casino Resorts for $1.8 billion.
Crown explained to analysts that the moves were made for “investment purposes only.”
“However, they are hopeful (the investments) could lead to strategic opportunities,” Deutsche Bank analyst Mark Wilson wrote in a note to investors. “We believe the strategic opportunities could include (joint ventures) and/or the acquisition of unwanted assets.”
One significant investment Crown and two partners under the holding company LVTI have committed to in the Las Vegas market could be in jeopardy, however. The company noted plans for a $5 billion resort casino project adjacent to the Sahara Hotel & Casino on the Las Vegas Strip is faced with tightened credit markets that could impact the ability to carry out development. Crown and its partners, Austin, Texas-based developer Christopher Milam and New York-based Capital Management are “undertaking a strategic review of its development options in light of recent upheavals in capital markets,” according to a Securities and Exchange Commission filing by Crown.
According to the Las Vegas Review-Journal, an option to buy the site for $475 million, or $17.7 million per acre, from Archon Corp. expires June 30.
Crown also holds a 19.6 percent equity interest in the $2.9 billion Fontainebleau Las Vegas project, which is scheduled to open in 2010. There are rumblings that Crown may abandon its LVTI bid in favor of turning its attention toward Fontainebleau.
“If LVTI does not move forward with the land purchase, we believe Crown Ltd. could provide more equity support for Fontainebleau,” said Wachovia Capital Markets bond analyst Dennis Farrell Jr. in a note to investors.