he Crown CEO, Rowen Craigie, emphasized last week that the company was working on finding a solution to save the deal from collapsing. The Pennsylvania Gaming Control Board cannot agree to the deal because Gretel Packer, the sister of Crown’s chairman, James Packer, has applied to withdraw from the mandatory licensing process.
Ms Packer’s move jeopardizes the entire deal because the purchase of all four casinos is conditional on regulatory approval. Craigie’s insistence that he is working to ensure the sale is finalized came after the company that is selling the four casinos to Crown accused it of using Ms Packer to renege on the deal agreed to in December 2007 for us$ 1.75 billion.
In the 14 months the regulators have been probing the deal, the market has plunged.The slump in the Las Vegas market in the past year meant the casinos it hoped to buy would now only contribute about 5 % of earnings in the 2010 financial year, Craigie said. This equates to about us$ 35 million, which, when combined with the outperforming Pennsylvania racetrack-casino’s estimated earnings of us$ 115 million, will bring earnings from the Cannery casinos deal to between us$ 140 million and us$ 150 million.
This is 30 % lower than the us$ 200 million Crown had estimated would be produced when it signed the deal. Craigie said he was committed to completing the Cannery deal, and was working with the PGCB "on the few outstanding issues that are left". This was in stark contrast to the sellers’ claims that Crown wants out of the deal.
But Craigie was tight-lipped about what Crown was doing to save the deal from collapsing and used the phrase "if we complete the transaction" when asked another question.
A company spokesman, Geoff Kleemann, said even though the "Russell 1000" index of major US casino and gambling companies had fallen 86 % in the past year, it was "a very long bow to draw" that the casinos were now worth "15 % of the purchase price" of us$ 1.75 billion. He would not say what the casinos were worth.
Craigie said he did not know whether the US casinos market had bottomed yet. He said the revenue statistics from Las Vegas showed little improvement. Overall Crown’s net loss for the half year ended December 31 was us$ 409.7 million, reflecting a us$ 547.5 million write-down on the carrying value of assets.