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Will Crown make a bid for Echo Entertainment in 2012?

Crown Casinos and Echo Entertainment are two of the biggest names in Australian Casinos. The Crown Casino Group, owned by James Packer (who has had his fair share of press attention in recent months), is the company that runs Crown Casino Melbourne and the Burswood Casino in Perth site that will re-open as Crown Casino Perth this year.

Echo Entertainment oversees the newly-reinvented Star City Casino in Sydney , which is Australia’s newest and arguably most luxurious casino resort.

The two firms have been in competition in recent months – even in the face of international economic pessimism and uncertainty over Australian Government gambling-control legislation – and vying for the custom of the ‘whales’, the ultra-rich VIPs who travel from China and further afield to gamble in Australia’s casino resorts.

The Star unveiled the first of its luxury penthouse suites at its boutique hotel, The Darling, at the end of last year, and should have others ready in time for the Chinese New Year holidays. Crown, meanwhile, was hosting Tiger Woods for an invitation-only golf event at their Perth site, and talking of further massive investment in Crown Casino Perth.

But the era of intense competition might not be all that long-lived, if a financial analyst’s report from last week proves prophetic. The report, which JP Morgan has released annually for the last couple of years, seeks to predict the big take-overs of the coming year – and top of the list this year is Echo Entertainment.

It’s thought the timing is good for Crown Casinos to make an offer for their rivals, potentially bringing the pick of Australia’s new breed of casinos resorts into one company’s ownership. According to JP Morgan;

‘Now is the time that Crown has to move if it wants to buy the company at a decent price. Once the (Star casino) capital expenditure benefits start flowing through to the bottom line, the share price might be out of reach.’

Certainly, the JP Morgan report has a fair history of picking the takeover bids on the horizon - including Sundance, Extract Resources and Equinox Minerals in the past two years.

And it’s true that James Packer has made no secret of his, and Crown Casino’s, ambitions to dominate the Australian Casino market and to draw as many overseas gambling tourists as possible to Australian shores. The company already owes a 5% share of Echo, as well as interests in other rival casinos, in Macau and in the US.

With Echo Entertainment JP Morgan’s ‘highest conviction takeover target’ for the coming year, it could be that Crown Casinos are ideally placed to absorb the competition. It remains to be seen if that turns out to be a good thing for casino-goers, be they from overseas, or from here in Australia...

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