Tuesday, October 28, 2008

Son Of A Gambler

We all know about Kerry Packer. Since James Packer took control of the family corporate empire, he made a huge bet on the future of the empire. Like father like son. However, Packer junior has lost heavily over the last 6 months, and all this for having taken over the Packer empire since Kerry's death in December 2005. This is the score:

* The value of Packer's flagship company, Crown Limited, in which the Packer family has a controlling interest, has fallen from A$15 a share since it was listed last year to A$6.66 (the devil's number).

* Shares in Packer's billion-dollar gambling play in Macau, Melco Crown Entertainment, have gone into free-fall, dropping just over 85 per cent, from $US22 to $US3.18, since their peak 20 months ago.

* In April Packer was offered A$4.80 a share, or $3.3 billion, for the media company CMH, by another media heir, Lachlan Murdoch. Packer declined, wanting a higher price. The shares have since plunged 60 per cent, to A$1.94, closing on Friday at A$2.02. Almost A$2 billion in value has evaporated since the bid.

* Shares in the Packer-controlled investment company Challenger Financial Services Group have fallen from A$6.58 to A$1.785 in the past year, a 73 per cent plunge for a company with a large number of small investors attracted by the Packer name.

* Australia's biggest mortgage fund, Challenger Howard, 20 per cent owned by Packer's CPH, suspended investor redemptions last week, freezing A$2.8 billion because it said the Federal Government's pledge to guarantee bank deposits had caused a run on the fund.

* Crown's plans to build the tallest tower in Las Vegas in a multibillion-dollar casino-hotel development have been abandoned, with a A$44 million write-off in development costs.

* Seek Limited, the online company in which Packer holds a 27 per cent interest, has had a run on its shares, which have fallen 40 per cent since September from A$5.60 to A$3.65.

Packer's net worth is now less than half what it was a year ago. His self-worth might be similar.

It could be worse. Macquarie Bank, known as "the millionaires factory" for the exorbitant rewards its executives paid themselves, was savaged for years by scathing assessments by analysts aghast at the size and secrecy of its fee structure. Now the bill has come due, paid for by its shareholders. Macquarie Group's share price has plunged 71 per cent from a peak of A$98.50 last year, to A$28.75 on Friday. Readers of my blog would have been familiar with my incessant bearish views on Macquarie Bank before.

Even more blood has been shed at its reckless imitator, Babcock & Brown, whose market value has been destroyed since it peaked last year at A$33.90. It closed at A$1.40 on Friday, having lost 96 per cent of its market value and 100 per cent of its reputation.

Anyway, back to James Packer, in light of his own personal financial woes as cited above, he has cut the 52-year ties to his late father Kerry's media empire and leaves the once all-powerful Nine Network and ACP Magazines in the hands of financial engineers. It's a big deal breaking away from his family's tradition and not to be on the board. However, James is also walking out of there with A$5.5 billion in his pocket.

Back in October 2006, James moved swiftly to hive off half of PBL Media to the private equity firm CVC Asia Pacific. He pocketed A$4.6 billion in cash as he sought to pursue his ambition to build an empire of his own with casinos in Australia, Macau and the US. The second stage came last year, when he sold another 25 per cent of the business to CVC for A$525 million.

Packer still owns 25 per cent in PBL Media, which can now be diluted over time. For James Packer, selling most of PBL Media at the top of the private equity boom might be the deal of his life, akin to his father selling Nine for A$1 billion in 1987 to Alan Bond. James Packer did as good as his dad in this PBL deal. He sold it to a second Alan Bond, which is the CVC people.

James Packer has now fallen from the top of the Rich 200 List as share price falls in CMH and his gaming arm, Crown, eroded his wealth, last estimated at A$5.2 billion in May 2008. He is now worth less than half that amount. Poor guy.

p/s photos: Gigi Lai (sigh, my TV queen has retire from acting in TV series...)


KoSong Cafe said...

As I see it, being an heir to a huge empire, any action or inaction is a gamble.

If he were someone who dislikes running a big business corporation with subsidiaries in various industries, he could leave it with professional managers. But if he is not the hands-on type, he will be depending on the ability and integrity of his team.

If he had sold those companies you have mentioned and decided to play safe and have peace of mind, by putting all the sale proceeds into banks as fixed deposits, he could have lost them if the banks went bankrupt, like what we have witnessed all over the world!

Come to think of it, any investment seems like a gamble these days. If any of us bought some of our local 'blue chips' two weeks ago, we would have regretted.

CSK said...

Dont worry, your Lai Chi will come out after finish using her money and taking care of her injured brother.

Salvatore_Dali said...


not true, if he had better advisors, I would have advised him to get out of certain sectors, his exposure are all leveraged and financial based ... even his media is geared... thats not the way to manage an empire... you would be a hero in the right cycle but a pauper in a downcycle like now, getting hit left right and center ...u need some business throwing off steady cash flow to counter the volatility... such as tobacco or toll roads (not geared please)

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