James Packer’s decision to step down as a director of Crown is...

James Packer’s decision to step down as a director of Crown is most likely not a signal that privatisation is imminent.
There is an obvious temptation to link James Packer’s decision to stand down from the board of Crown Resorts to the swirling speculation of a privatisation of his casino empire. The explanation, however, appears far more mundane.
Earlier this year, in August, the appointment of Rob Rankin as Crown’s chair signalled Packer’s intent to step back a little from the affairs of the group he controls via his 53 per cent shareholding. Rankin, a former investment banker, became chief executive of Packer’s private group, Consolidated Press, in March.
At the time Packer made it clear that he would continue to be very actively involved with Crown but would focus more intently on the group’s Melco Crown joint venture in Macau, its planned new casino development in Las Vegas and the high-roller and hotel development at Barangaroo in Sydney.
In today’s announcement he referred to his ambition of building Crown into a ‘’global luxury brand’’ and said that is where the majority of his time would be spent. He also said he would work to improve Crown’s online strategies, which he said could be a platform for global growth in future.
In other words, he is distancing himself from the routine governance-driven involvement at board level to focus on what he sees as Crown’s growth options.



Given that he has nearly $5 billion tied up in his Crown shareholding, the decision to step down as a director could never be seen as Packer cutting ties with the group but nor should it be seen as a signal that a privatisation is imminent.
There has been a lot of speculation in recent weeks that Packer has been talking to private equity firms about a joint bid for Crown to take it out of the public arena.
That speculation, and its impact on Crown’s share price, triggered an ASX query last week and a response from Consolidated Press itself that acknowledged it had ‘’from time to time’’ held confidential discussions with third parties about its shareholding in the group.

It hadn’t, however, put forward any proposal to Crown’s independent directors of the kind being speculated. It also said that the fact that it might continue to have confidential discussions with third parties regarding the shareholding should not be taken as any indication that any proposal would be made in future.
In other words, it is conceivable that Cons Press might team up with a third party to privatise Crown, but there is nothing in train at this moment.

The rationale for a privatisation is obvious. The crackdown on corruption in China has had a dramatic impact on the fortunes of Melco Crown (third-quarter revenues were down 16 per cent compared with the same period of 2014) and been a major factor in Crown shedding about $3bn of market capitalisation since early this year.
Packer, however, is a believer in the longer term outlook for the Melco Crown businesses and would inevitably believe that the current market is grossly undervaluing the group.
Crown is also embarking on a very large greenfields expansion program, with the Las Vegas and Sydney developments and potentially other new properties. He might well believe that through that higher-risk period Crown might be better held privately by Cons Press and a partner with access to deep reserves of patient capital.
Given that Rankin is both chairman of Crown and CEO of Cons Press, Packer’s departure from the board has no obvious relevance for any prospective privatisation.
It doesn’t truncate the conflict of interest that would arise for Cons Press and its representation on the Crown board if such a proposal were made. It would still have to be handled by the independents on the board.
Packer himself referred to a ‘’transition’’ for Rankin in to the chairman’s role and his own transitioning overseas, which is where he now spends most of his time.
He also referred (without explanation as to how it related to his decision to quit the board) to ‘’a major transaction in my family’s business”, saying this had also assisted in the timing of his decision. That transaction involved an amicable financial settlement with his sister Gretel.
Packer will remain co-chairman of Melco Crown and maintain the same role at Alon, the vehicle for the planned Las Vegas development, as well as having a vaguely-defined executive status within the broader group.
That’s unusual and would normally be controversial, but with his 53 per cent shareholding in a group that reflects his vision and ambitions, he is able to define his own roles.
It would appear, for the moment at least — and with his hand-picked and trusted lieutenant in the chair — that he is more interested in the on-the-ground challenges and excitement of Crown’s pipeline of new developments than he is in the tedium of board meetings. Who could blame him?