Ellerston wishes on Star

Packer-backed fund takes stake as Genting exits

JAMES Packer-backed Ellerston Capital has become a substantial shareholder in casino operator Star Entertainment at the same time as a major Asian investor exits.

Star told the ASX yesterday that Ellerston and its associates had lifted their shareholding on July 13 and now hold a 5.07 per cent stake in the owner of The Star Gold Coast.

That was the same day that Malaysian gaming giant Gent- ing sold its holdings for a $67.5 million profit, ending its fiveyear investment in the Brisbane-based company.

Mr Packer, who owns a major stake in rival casino company Crown Resorts, has a 25 per cent interest in Ellerston through his private investment vehicle Consolidated Press Holdings.

But the billionaire is a passive investor in the fund and any move on his casino rival would be independent of him. A Star spokesman said the company welcomed any institutional investors showing greater confidence and support for its business. Ellerston did not respond to a request for comment.

Citi analysts said last week that they were not ruling out the prospect that Crown and Star would eventually merge.

The investment bank estimated Crown’s earnings could jump some 20 per cent following a merger. Hunter Green Institutional Broking director Charlie Green said the purchase by Ellerston was another vote of confidence in the Star business model.

It is believed Prudential, the largest single shareholder in Star, also took the opportunity to lift its stake in the company after Genting sold out to concentrate on its US operations.

“These are important devel- opments for Star’s share registry, especially for Queensland given the importance of the Queen’s Wharf project,” said Mr Green.

Mr Green said talk of a merger between Star and Mr Packer’s Crown Casino was a “bridge too far” and would be unlikely to receive the green light from regulators.

“It would be stillborn,” Mr Green said, stressing Ellerston would have made an indepen- dent decision to invest in Star but that the gaming industry would be part of its “DNA.”

A combined company would attract 86 per cent of domestic mass-market gaming revenue and 90 per cent from VIP customers. Citi conceded a merger would attract regulatory scrutiny but noted they operated in different segments of the market.

Crown’s proposed new Sydney casino will be cater for premium customers while Star’s casino in that city is geared to the mass market.