James Packer made his triumphant return to Crown Resorts this week after 17 months away from the company. Packer is back as a director, after the company reported dismal earnings and became embroiled in an advertising scandal in China.
Chairman Robert Rankin is leaving Crown Resorts. Rankin was a longtime employee who took over the company after James Packer stepped away from his duties, in two stages (August 2015, November 2015). Rankin, who is also Crown’s CEO, is expected to leave both roles on February 1. He’ll remain on Crown’s board of directors.
Holds Nearly 50% of the Shares
Despite leaving the company his father, Kerry Packer, founded, James Packer’s Consolidated Press Holdings still retains 48.2% of Crown’s stock. At one time, Crown Resort’s success made James Packer Australia’s richest person, with a reported $7 billion.
That was before the decline of Macau in 2014. In the ten years after Kerry Packer signed the Melco Crown partnership with Lawrence Ho, the joint venture’s Macau revenues fueled tremendous growth for Australia’s largest casino company.
Left Crown’s Board in 2015
When Macau saw a 50% drop in its revenues over 2014 and 2015, James Packer stepped back from the company. It never was explained why he left Crown so abruptly. Speculation ranged from the loss in share prices to his pending engagement to American pop diva, Mariah Carey. With the engagement to Ms. Carey ended in late 2016, it appears Packer is ready to focus on business again.
In announcing his return, James Packer said he has a 5-step plan to rejuvenate Crown Resorts. In a prepared statement, James Packer said that plan begins with “managing through the whole China situation in a way that is respectful to China and in a way that best represents our staff.”
Crown Resorts’s Chinese Scandal
James Packer’s ties in China might be particularly useful at the moment. From 2005 until 2014, Packer was the face of Crown Resorts in China. He and Lawrence Ho, son of China’s King of Gambling, Stanley Ho, launched three casinos: City of Dreams, Altira Casino, and Studio City.
In those years, one can assume that James Packer met every Chinese official of importance in Macau, and a certain number in the national government. With 3 Crown Resorts employees arrested and 15 others detained by Chinese officials for advertising crimes, it is possible James Packer is the best man to find a resolution with the Chinese government. The scandal appears to be the main driver of Robert Rankin’s fall from power, though the poor revenue figures certainly played a role.
Dividends for Crown Investors
Crown Resorts reduced its debt by $800 million when it sold its shares of Melco Crown stock. The company also paid a $500 million dividend to investors, while spending another $300 millon on a share buyback in hopes of maintaining Crown’s stock price. Because James Packer owns 48% of Crown stock, he collected $240 million from the special dividend.
Last month, Crown announced it was pulling out of its investment in the Alon Casino project on the Las Vegas Strip. It long had been speculated that Crown would leave the Alon project and that casino developer’s owners claimed they would forge ahead with their original plans.
Priorities for 2017
The second priority is to run Crown’s business in a “more lean and focused fashion“. James Packer said the third order of business would be to build and run “a meaningful, profitable, online business“.
With the possible passage of the Interactive Gaming Bill 2016, domestic Australian gaming companies might have more opportunities for growth online. Offshore operators might be driven off the continent.
Rumors continue to swirl that Crown Resorts and ClubsNSW might sign a partnership. ClubsNSW, which has 1200 members, is said to be looking for an online partner.
Crown Barangaroo Project
The fourth priority for Crown is to see the completion of the Crown Sydney in Barangaroo “on time and on budget“. The Barangaroo project is a VIP high roller casino in Sydney, New South Wales.
The fifth and final goal for 2017 is for Crown Resorts to be “shareholder focused in the way we do business.”
That likely means Crown is promising its shareholder it will downsize and streamline the business for the sake of profitability, in order to see share prices increase.
Stock Prices Slump after Announcement
The announcement James Packer was returning did not seem to inspire investors. The stock prices fell 14¢ to $11.58 when investors on the Syndey Stock Exchange heard the news. Given the company underwent a shakeup only 17 months ago, traders might view the once and future CEO’s ascension as a sign of general instability and upheaval.
John Alexander’s Role
John Alexander, a board member since 2007, is expected to replace Robert Ranking as executive director. Alexander is also a director at Seven West Media and the speculation is he might step away from those duties in order to focus on Crown.
Alexander said in a statement to the press, “Crown Resorts is and will remain one of Australia’s most valuable tourism assets with its world-class resorts in Melbourne and Perth, and construction in Sydney now under way. I am also excited about our plans to continue building our wagering and online businesses.”
Guy Jalland and Michael Johnston
Guy Jalland, a longtime legal adviser and employee of James Packer, is expected to take over a role on the board when a position comes open. Michael Johnston, who like Jalland and Alexander worked for James Packer on the Publishing and Broadcasting Ltd. board, is also expected to join the Crown board in time.
All parties insisted that Robert Rankin’s departure was amicable. Rankin leaves to focus on Packer’s investment vehicle, Pacific Point Partners. In a statement, Robert Rankin said, “The next stage of development of Crown Resorts will be rightfully more focused on its outstanding [Australian] assets, and led by John Alexander. Crowns Resorts has a very strong team in place to do that.“