Cannery gives Crown foothold

Crown Ltd.'s $1.8 billion buyout of Cannery Casino Resorts provides the expanding Australian gaming company what it has been seeking for the later part of 2007: an entry into the growing United States casino market.

The acquisition also provides a fast-track entry into Nevada.

"The (Cannery) purchase provides an attractive base of casinos that will allow Crown to pursue further acquisitions in this space," wrote Macquarie Research Equities analyst Steve Wheen in a Wednesday note to investors.

Crown will own and operate Cannery-branded hotel-casinos on Boulder Highway and in North Las Vegas, and manage a third casino in Summerlin. The company will also acquire a racino in southwest Pennsylvania outside Pittsburgh.

Bill Paulos, current co-owner of Cannery Casino Resorts, said he expects Crown to continue to expand the company.

"The most important thing for us was who was going to take over our company and what future laid ahead for our employees," he said.

Crown officials, who were in town Tuesday and Wednesday, did not return requests for comment.

Crown, which is listed on the Australian Securities Exchange, is controlled by the 40-year-old Australian billionaire James Packer.

Crown also has a 19.6 percent stake in Fontainebleau Resorts and a 37.5 percent stake in Crown Las Vegas on the Wet n' Wild site.

The Cannery transaction will take a year to 18 months to clear regulatory hurdles, including approval for a gaming license in Nevada and Pennsylvania. But the signing of an agreement to purchase the already operating Cannery will make the licensing process for Crown more immediate.

Gaming Control Board Chairman Dennis Neilander said regulators have already had discussions with Crown's Nevada gaming counsel about the company's structure and what type of applications the company will have to file.

Since Crown is publicly traded, the company's officers, directors and any individual shareholders controlling 10 percent of the stock will have to be investigated and approved by gaming regulators.

Crown owns two resorts in Australia and has joint-venture ownership interest in casino projects in the United Kingdom, Canada and Macau.

David G. Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, agreed that the Cannery acquisition further positions Crown nicely in the area market.

He also added the acquisition could also have an underlying value beyond just brick-and-mortar casinos: the industry knowledge of Cannery founders Paulos and William Wortman.

Paulos spent time in downtown casinos before joining Circus Circus Enterprises in 1980 where he stayed for 14 years. Wortman is also a former executive at Circus Circus and has been co-owner of Nevada Palace since 1985.

Paulos and Wortman have committed to stay with the company six months after the scheduled March 2009 opening of the $155 million permanent racino in Pennsylvania, Paulos said.

Beyond that, he added, options are open.

Packer, the richest man Down Under with a published worth of $5.5 billion, is a familiar name to the Strip casino industry because of his father, the late Kerry Packer.

The elder Packer, a legendary high roller and big tipper who died in December 2005, is rumored to have won between $20 million and $40 million over several days at the MGM Grand in 1997 and tipped as much as $1 million at Bellagio.

However, the son plans to be on the other side of the casino tables. He used 2007 to invest in future resort developments before moving all in with the Cannery Casino Resorts.

A wrinkle could develop in Crown's licensing process in Nevada: the company's 37.9 percent ownership in Melco PBL Entertainment.

Melco is run by Lawrence Ho, son of businessman Stanley Ho, who owns several Macau gambling halls.

MGM Mirage went before state gaming regulators in March to explain its partnership with Pansy Ho, Stanley Ho's daughter, in the MGM Grand Macau.

Crown has a series of projects opening in the next few years with Lawrence Ho, could expect the same close scrutiny to ensure that Stanley Ho does not directly influence the son's operations.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or (702) 477-3893.