Spotlight on: The Packer empire


James Packer has often been regarded as one of Australia’s richest individuals and was voted as Australia’s richest person in 2006 and 2007 according to the BRW Rich List.

However, in 2008 his fortunes swung, falling to third on the list. It was the first time in more than 20 years that a Packer was not top of the BRW magazine’s rich list. By 2011, James Packer had slipped to number 8.

His net worth has also slipped, after reaching a peak of US$7.2 billion in 2007. In 2011, BRW estimated Packer’s net worth at $4.2 billion. BRW is due to release the 2012 version of the rich list towards the end of this month.

PBL Splits into two

In 2007, Packer’s primary investment vehicle, Publishing and Broadcasting Limited (PBL) split into two entities. They are Crown Limited (ASX: CWN) and Consolidated Media Holdings Limited (ASX: CMJ), with Crown focused on gaming and CMH focused on media.

Crown ended up with a diversified portfolio of gaming businesses.  It includes two casinos, a 41.4% stake in Melco PBL Entertainment, a 50% stake in the Aspinalls casino business in the UK, a 19.6% stake in Fontainebleau Equity Holdings in the US, and some other minor investments in gaming businesses.

Consolidated Media Holdings ended up with a 25% stake in Foxtel, 50% in Premier Media Group (commonly known as Fox Sports), 25% of PBL Media and 27% of Seek Limited (ASX: SEK). Foxtel is partly owned by Telstra Limited (ASX: TLS) with 50%, and News Corp (ASX: NWS) with 25%. The stake in Seek was sold in August 2009 for $441m.

From media to gaming

James Packer has increasingly moved away from the media assets that he inherited from his father, Kerry Packer, towards a global casinos and gaming empire. The split of PBL into Crown and CMH was just one of the logical steps along the way.

Recently James Packer has been looking to sell his 50.1% holding in CMH. This is just a further step in Mr Packer’s move away from media into gaming. Market speculation is that the stake will be used to help fund a merger between Crown and Echo Entertainment Group Limited (ASX: EGP), which owns The Star casino in Sydney and Jupiters casino on the Gold Coast. Crown staged a raid on Echo in early March, purchasing 10% of the company, and has requested permission from the New South Wales Casino, Liquor and Gaming Control Authority, to raise its stake beyond 10%.

It appears that Echo Entertainment is one of the most likely takeover targets on the ASX. It’s possible the takeover will come once Crown has approval to raise its stake, and the funds to purchase the remaining 90% of shares it doesn’t yet own. Given the cost will be more than $2.8bn, Crown will need to find some partners to help fund the deal.

Mr Packer is also proposing to use Echo Entertainment’s rights to Sydney’s monopoly casino licence to build a $1 billion casino and hotel complex at the Barangaroo development site, on Sydney Harbour.

Value and other investments

James Packer currently owns 48% of Crown, recently topping up his holding from 45%. That stake has a current market value of around $3.2 billion. His 50.1% holding in CMH has a current market value of $891m.

Mr Packer also owns a 17.9% stake in Ten Network Holdings Limited (ASX: TEN), which is currently valued at $144m. The Packer family’s investment fund, Ellerston Capital also holds 5% of Treasury Wine Estates Limited (ASX: TWE) – current market value of $182m, according to this news report in February 2012.

He also has stakes in many other businesses including online sites Scoopon, DealsDirect, and Catch of the Day as well as a 73% holding in the Perisher ski field in NSW.

Foolish takeaway

How James Packer has structured his investment portfolio holds a lesson for investors like you or I. His stake in Crown and Consolidated Media are his core holdings, and both companies are also diversified by investments in different companies in different countries. His stakes in other media businesses are there for growth purposes, or to take advantage of a situation that may come about.

His investments in Scoopon and DealsDirect could be considered the speculation part of the portfolio, and the investment in Perisher there for the fun of it. After all, if you’re a billionaire, it can’t be all work and no play – right?

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The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. Mike King has no interest in any companies mentioned in this article. This article contains general investment advice only (under AFSL 400691).

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