Fired up by last year’s explosive legal moves on Westpac, the nation’s anti-money-laundering regulator, AUSTRAC, is said to be sharpening its focus on the gambling industry.
Casino operators such as Crown Resorts and Star Entertainment won’t be the only outfits under the microscope — big poker machine owners, including Woolworths, might also find themselves under heightened scrutiny.
Woolworths announced plans in the middle of 2019 to get out of its pubs, bottle shops and poker machines business via a sale or demerger.
AUSTRAC chief executive Nicole Rose last year warned the financial intelligence agency would examine potential “gaps” in regulations that dictated what casinos must know about their gaming clients as part of a probe into the risks of casino junkets.
It could not come at a worse time for Crown and James Packer, with less than three weeks until the start of a public inquiry by the NSW Independent Liquor and Gaming Authority into its suitability to hold Sydney’s Barangaroo casino licence and the suitability of its 9.9 per cent shareholder, Lawrence Ho’s Melco, to be an associate of Crown.
The outcome of this hearing will have a momentous impact on the landscape of the local gaming industry and on the future of Packer’s presence in Australian business.
The inquiry, to be conducted by Patricia Bergin, SC, was initiated in response to allegations aired by 60 Minutes, The Sydney Morning Herald and The Age that Crown engaged in money laundering, breached gambling laws and partnered with junket operators with links to drug traffickers, money launderers, human traffickers and organised crime groups.
The inquiry will assess whether either Melco’s initial acquisition of a 9.9 per cent stake from Packer or a deal to purchase an additional 9.9 per cent cent breached the terms of Barangaroo’s restricted gaming licence.
People familiar with the inquiry’s pre-hearing information gathering say the focus has been on the VIP business rather than mass market operations.
Conventional wisdom inside the gaming industry is that the inquiry will not affect Melco’s chances of completing its agreement to take a near 20 per cent stake in Crown.
Casino experts are also betting that Crown will safely retain its licence in Sydney.
However, opinion is divided on whether the NSW regulator may attach some additional conditions.
There is a May 31, 2020, sunset clause contained in Melco’s agreement to acquire the second tranche of Crown but there is also a facility that allows it to be extended to an unspecified future date.
But it is worth noting that conventional wisdom inside the banking industry before the Hayne royal commission was that while the hearings could embarrass some participants, little would change.
Crown’s inquiry could easily result in some uncomfortable moments for its board, its executives and for Packer.
We will get a better sense of what to expect when the public inquiry begins on January 21.
For Crown’s minority shareholders, any move to prohibit Melco from increasing its stake will have significant implications.
It will leave Packer in place as a 36 per cent shareholder and Melco with only 9.9 per cent – producing an unstable share register.
For at least six months before announcing a deal to sell a 19.9 per cent stake to Ho, Packer had shopped around his 46 per cent holding in Crown.
A tentative deal was done with Wynn Resorts – one which fell through after it became public and Wynn walked away.
The subsequent news of an agreement with Melco only confirmed speculation that Packer was keen to exit the casino business.
Achieving this ambition could become a lengthy process, even if Melco is permitted to gain control of a 19.9 per cent stake.
Industry insiders suggest a full takeover is less likely and that Melco may use the provisions of the Corporations Act to creep up the register at the rate of 3 per cent each year.
Some opine that Ho would wait until Melco’s licence review in Macau, set for February 2021, is completed. All Macau licences are coming up for review/re-licensing at that time.
There is some risk that Beijing might not look favourably at additional large-scale investments outside China’s gambling territory.
In the meantime, any regulatory moves that delay the scheduled opening of Barangaroo in 2021 represent a financial reprieve for Crown’s rival Star Entertainment.
Analysts estimate that competition from Barangaroo will cost Star’s earnings before interest tax depreciation and amortisation between $50 million and $75 million a year.
There is a lot riding on the Bergin inquiry and its findings.
Source: Thanks smh.com