There's an easy explanation for the split in the Packer Empire, announced yesterday. While the overall market is up around 11 to 12 per cent since January 1, shares in PBL, the key company in the Empire, had only risen 3 to 4 per cent, much to the frustration and annoyance of James Packer and his board.
Shares in gambling stocks in the US are up sharply but PBL was been weighed down by the impact of the company's media assets, especially the sluggishly performing Nine Network.
That is about to change and the shares accelerated to hit a high of $22.50, up around 1.70 before settling $1.26 higher at the close on $21.99. That's still below the all time high of $22.40 hit last December amid the full rush of media speculation.
The announcement of the split between the gaming and the media assets calls into question the sale of 50 per cent of PBL Media last year to CVC Asia. It wasn't needed and simply raised cash which has so far been dolled out in fitful investments in the media (NBN) and casinos (Las Vegas and Macau) without much coherent thought. Now $2 billion of that cash will be used to pay shareholders $3 a share each. James Packer's company, Consolidated Press will receive more than $754 million of that money which was raised to power the new future for PBL.
That's around half the $4.5 billion raised in the PBL Media-CVC deal will be used to pay to shareholders. Mr Packer's master company, Consolidated Press Holdings will also keep a 37 per cent stake in the two new companies, Crown and Consolidated Media Holdings.Crown, will be the real powerhouse with direct stakes and ownership in most of its best assets, except Melco in Macau and the new Las Vegas business.
Crown will own Crown and Burswood casinos in Australia, a 41.4 per cent stake in Melco PBL Entertainment in Macau and other international gaming assets in the UK (50 per cent of Aspinalls) and in Las Vegas. It will also own half of Betfair in Australia.
Melco announced yesterday plans to borrow up to $US3.3 billion to finance new casino projects.Mr Packer will be executive chairman of that while his casino boss, Rowen Craigie will be CEO.Consolidated Media Holdings will own a series of stakes in various businesses and won't have a direct profit centre under its full control.
That will make it less of a growth stock, although its new media assets in Ninemsn, Seek, Foxtel and Premier Media group will have considerable appeal to many media investors because they will be more visible than before.
Cons Media will own a 50 per cent stake in PBL Media, which runs the Nine Network, 25 per cent of Foxtel, 50 per cent of PMG, Ticketek, and a 27 per cent stake in Seek.There's no place for the 50 per cent of Hoyts (WA Newspapers owns the other half) and the PBL stake in the New Regency film studio in the US will be sold.Two years ago PBL issued more shares to Cons Press to buy a 50 per cent stake in Hoyts in partnership with WAN where PBL Media CEO Ian Law was headhunted from.
But the big story is the historic split and move away from a company structure established by his late father."It's time to let these two successful businesses prosper in their own right,'' James Packer said in the statement. "Investors will have the opportunity to invest in a strong and growing pure play media company and also in a world class gaming company.''
Under the proposal, both companies will trade on the stock exchange and shareholders of Publishing & Broadcasting will receive one share in each company for every share they own, plus about $3 a share in cash. They can also choose to get a higher proportion of the payment paid in shares or cash.
"The gaming and media businesses have different operating characteristics and capital requirements. The Board and management believe that separating the businesses is the best way to create shareholder value through harnessing the significant growth opportunities available to each business."
"The restructure will offer shareholders a clear choice of investment, providing each business with improved flexibility, a clear mandate, and an appropriate cost of capital. It will also provide shareholders a more direct and efficient avenue to access our exciting investments in Foxtel and FoxSports."
"Both businesses will be operated separately, each with its own Board of Directors. James Packer will become the Executive Chairman of Crown and the Deputy Chairman of CMH. John Alexander will become the Executive Chairman of CMH and the Deputy Chairman of Crown. Rowen Craigie will become the Chief Executive Officer & Managing Director of Crown, which will be based in Melbourne.
"The restructure is intended to be implemented through schemes of arrangement in PBL and Crown."
