Cannery ‘Crowned’ in buyout

Dec 18, 2007 6:10 AM

One of the legendary figures in Las Vegas gambling lore is Kerry Packer, the late Australian media magnate who loved to play high-stakes baccarat and blackjack at $250,000 a hand or higher.

Now, Packer’s son, James Packer, wants to make his own foray into Las Vegas, but on the opposite side of the tables.

Last week, Packer’s company, Crown Limited, announced it had agreed to buy Las Vegas-based Cannery Casino Resorts (CCR) for about $1.8 billion.

Cannery’s assets include three casinos in Southern Nevada — the Cannery, Nevada Palace and the Rampart — and the Meadows Racetrack & Casino in Pittsburgh, Pennsylvania.

Cannery is also developing two casino/hotel complexes, which are expected to be completed or substantially completed prior to financial close of the acquisition:

”¡ East Side Cannery in Henderson, which will replace the existing Nevada Palace.

”¡ The Meadows Racetrack & Casino: a facility that will replace the existing temporary quarters in 2009.

At completion of these two construction projects, CCR will operate approximately 8,400 slots and 75 tables and over 720 hotel rooms throughout its properties.

CCR is owned by Millennium Gaming Inc (58%), which is a joint venture between Bill Paulos and Bill Wortman, and entities managed by Oaktree Capital.

The Cannery’s connection to Packer may have been established in the early 1990s, when Kerry Packer hired Paulos to run Crown in Melbourne when it first opened.

"Crown is a world class operator," Paulos said last week. "We absolutely believe that Crown’s acquisition of Cannery Casino Resorts is a great fit for our company and the future of our employees."

Since Packer’s death in 2005, his son has sought to move out from beneath his father’s oversized shadow by shifting the family business from media to gaming.

Over the last couple of years, Packer has sold down Publishing and Broadcasting’s interest in his father’s beloved Nine Network to just 25 percent, and poured the funds into an expansion of the Crown casino empire in Australia, Macau, Britain, Canada and now the U.S.

"CCR’s existing shareholders — Bill Paulos, Bill Wortman and Oaktree — have created first class locals properties located in markets with attractive, long-term growth prospects," Packer said last week. "Crown’s skills and experience in operating successful locals casinos will enable us to grow the CCR business further."

The purchase of Cannery Casino Resorts will require the approval and licensing of Crown (and presumably James Packer) by the Nevada Gaming Commission, Pennsylvania Gaming Control Board and the Pennsylvania Harness Racing Commission. The process will take at least 12 months and possibly up to 18 months.

Earlier this year, Packer invested $250 million in the Fontainebleau Resort project, a $2.8 billion Las Vegas development scheduled to open in 2009 on the north end of the Las Vegas Strip.

According to the Nevada Gaming Control Board, Packer has yet to apply for a casino licence.

The board’s chairman, Dennis Neilander, has already indicated that he would be looking very closely at Packer’s partners, specifically Lawrence Ho, son of the colorful Macau gaming identity Stanley Ho.

Packer and Lawrence Ho jointly opened the $540 million Crown Macau Casino earlier this year. Stanley Ho has repeatedly denied allegations of links between his casinos and organized crime activities, including money laundering, drug trafficking and prostitution.

In March, MGM Mirage was dragged before the Nevada Gaming Control Board to explain its relationship with Stanley Ho’s daughter, Pansy, in Macau.

Gaming analyst Bill Lerner, of Deutsche Bank, told an Australian newspaper that while Packer should get a licence, his difficulties stem less from his partnership with Lawrence Ho than with his dealings with junket operators — agents paid by casinos to bring high-end gamblers to their properties.

"Some of these guys, let’s say, might have trouble passing muster here in the United States," Lerner said.