Echo Entertainment chairman John Story has resigned from the board, bowing to pressure, it seems, from rival casino boss James Packer.
In recent weeks, Crown’s Packer has intensified efforts to gain control of the rival Australian casino operator by aiming to remove Story as a director.
Echo operates four casinos, including The Star in Sydney, which is understood to be the key to the whole issue. Packer is believed to be pushing for Echo to make use of its New South Wales licence to set up a second casino in Sydney at Barangaroo Point, which he intends that Crown would develop. However, in order to achieve this, Crown would need to take control of the company or, as its latest move indicates, place its own representative on the board in order to exert greater influence.
Crown and its subsidiary Pennwin have around AU$250m invested in Echo but have yet to make a major play to take a controlling stake. At the end of May, however, Pennwin exercised its right to request Echo’s directors call a general meeting with the intention of calling for Story to be removed as director and replaced with former politician Jeffrey Kennett. This meeting had been set for July 20.
In response to the call for a general meeting, the board had urged urged shareholders to vote against this effort to bring Crown’s candidate to the board. Today, however, the board said that the “ongoing disruptive campaign” concerning the proposal to remove Story was “damaging to the company” and that it was in the best interests of the shareholders that he did not contest the resolution. Story was of the opinion that it was a matter that should be considered and determined by all shareholders, but accepted the view of the board, it added.
In recent weeks, Packer had been attempting to drum up support by meeting with key institutional investors. He has also taken out pages of advertising in leading Australian newspapers questioning Story’s record as chairman and has given several interviews criticising Echo’s performance.
He has denied, however, that his attempt to oust Story from the board is motivated by a desire to take control of the company without paying a premium for it.
“This is a complete furphy [rumour] from John Story and his crisis spinners,” Packer told the Sydney Morning Herald. “Jeff has been proposed as a director, not the chairman. If Jeff is appointed, he will be one out of seven directors. How is that control? With this spin, Story and the board want to divert shareholders' attention from Echo's sub-standard management and poor performance, but I don't believe institutions and investors will fall for that.”
Commentators had suggested that institutional investors remained unconvinced by this new attempt to influence the direction of the board, with many suggesting that at least on this occasion, this strategy was likely to fail. The news that Story has left the company may change this.
