Anyone who knows James Douglas Packer knows he does not like being written about in the media, which is ironic considering that very industry created his family's fortune.
In his more candid moments, friends say Packer has been known to unfavourably compare the number of column inches he receives in the press with that of every other child of an Australian family dynasty.
"Why don't the Lowy kids get this sort of publicity?" he is said to have asked rhetorically, as his personal financial wealth and status took a very public write-down.
The answer lies in the high-profile target presented by the Packer family name, and all it is associated with. In particular, it is a residue of the family's former standing as media moguls, having founded the country's leading television and magazine stable, the Nine Network and ACP Magazines.
Once, a certain amount of awe went with this status. The family long wielded considerable influence and built huge wealth with its assets, particularly Kerry Packer through Nine. Now, however, a journalistic lynch mob is delighting in seeing James, son of Kerry -- now a casino tycoon following the sale of all but a minuscule 0.07 per cent stake in Nine and ACP -- facing a world of financial pain.
When his father died in December 2005, Packer inherited a fortune estimated at $7billion. But the turmoil on financial markets has taken a terrible toll on his investments.
In May last year, BRW magazine estimated his personal fortune at $6.1 billion. Since then, his listed investments have lost $2 billion, and even friends now privately estimate his wealth at between $3 billion and $3.5 billion.
He has lost at least half of his inheritance. That makes Packer's an easy head to kick. Social pages have salaciously taken over from business sections in covering Packer's falls.
As one friend puts it: "Someone like Twiggy Forrest can just say his losses were on paper, and that's his way of dealing with it, but James can't do that. His wealth has always been in the family."
Another close Packer associate says: "James has been a pretty easy target to have a go at, and have fun doing it. It's what goes with the name.
"Rightly or wrongly, Kerry was perceived as being a lot tougher. Maybe people aren't quite as scared to write about James."
This source was one of a number of friends, senior executives and board members at major companies in Packer's orbit who have talked frankly to The Weekend Australian about his recent travails, and how they have been covered. Repeated calls to Packer's office in recent weeks have not been returned. But close associates say the tall-poppy syndrome kicks in when it comes to James, with the renewed public questioning of whether the Midas touch of Kerry has deserted the Packer family.
Those who have suddenly entered the world of white-hot public scrutiny that comes from being associated with a Packer are known to be surprised by it. Executives at CVC Asia-Pacific -- the private equity firm that took control of Nine and ACP in a blaze of publicity in 2006 -- privately confide they were not prepared for the intense and often critical media scrutiny that came with taking over Packer family assets.
The apparent delight in Packer's misfortune reached fever pitch on recent news about some of his so-called toys. He has put his $50 million luxury yacht, the Z Ellerston, on the market with a French boat broker months after it was launched in July last year. Depending on who you talk to, he will also either push back or shelve altogether delivery of a Boeing Business Jet, a $60 million private version of the Boeing 737-700.
Then there are the business losses -- largely from his investments in casinos and, to a lesser extent, financial services -- resulting from the global crisis.
The social pages have been in overdrive. Reports have suggested Packer, who recently became a first-time dad, is everything from "depressed", to "overweight", "back on the cigarettes", a "recluse" who tries to avoid as many public appearances as possible and "lying low" at his family's sweeping Ellerston property in NSW's Hunter Valley.
Such reports are mocked by those close to Packer. "He went to his farm for a couple of weeks, then he went to the US for his casino business, and people said he was a recluse because they didn't see him," one associate says. "But he just doesn't socialise. Just because he's not seen at social functions, it doesn't make him a recluse. It makes him sensible."
Talk about Packer has focused on the suggestion that in family dynasties the first generation makes a fortune, the second builds on it, and the third generation blows the wealth built by the first two generations. The question has been whether James -- the grandson of legendary Nine Network founder Sir Frank Packer -- would follow this pattern.
One confidante rubbishes such talk: "So much speculation (smacks) of people not knowing what's happening. They just publish wild theories. I think he has some troubles, but all this stuff about imminent collapse or being down to his last $1.8 billion are just rubbish. He's pretty low, but lots of people have lost money and are low at the moment. It's not exclusive to him."
Another confidante says: "He's not exactly throwing parties when the world's doing what it is. Does he feel pressure? Yes. Does he get depressed? No. But he does get upset for shareholders and for doing a bad deal."
Packer's defenders say the recent media frenzy has largely omitted and forgotten the good deals he did.
Two years ago, BRW said Packer was "proving himself the equal of his father Kerry". The deal that prompted these platitudes was Packer's defining move to effectively offload PBL Media to CVC for more than $5 billion in October 2006. This price was achieved at the very top of the media cycle, and just as the value of old-media assets such as Nine and ACP was about to collapse. Now the company is saddled with $3.8 billion in debt and forced to go to its bankers for approval to recapitalise before it breaches debt covenants, leaving Packer's sale looking even more prescient.
That was the high point of Packer's public standing. One close associate says: "Imagine if James hadn't sold PBL Media. He probably sold at the right hour, let alone the right time, and he paid back $2 billion to shareholders" of his former Publishing and Broadcasting Ltd media and gaming empire in 2007. "Look at CBS -- it is now trading at two times earnings in the US. It's shaping up as one of the smartest deals done in world media."
Packer looked doubly smart at the time of his initial deal with CVC when he was able to hang on to the key new-media assets accumulated as part of his father's empire.
These include a 25 per cent stake in pay-TV leader Foxtel (which is also 25 per cent owned by News Limited, publisher of The Australian), a 50 per cent stake in Premier Media Group (which operates the Fox Sports channels) and a 27 per cent stake in online job classifieds leader Seek.
These three stakes now make up the listed Consolidated Media Holdings -- in which Packer personally continues to be the largest shareholder with a 38 per cent interest.
ConsMedia was one of two companies formed late in 2007 when Packer split his father's former Publishing and Broadcasting Limited empire into two parts -- the media group and the separate gaming company, Crown.
In last week's earnings briefing, ConsMedia continued to be one of the few media companies recording rising profits. The company reported a 5 per cent rise in interim net profit to $46.2 million, as the Foxtel and Fox Sports stakes continued to be largely cocooned from the effects of the global downturn.
Sources suggest Packer would probably be a seller of his 38 per cent stake in the business, but at levels well above the current fire-sale price of about $1.90 a share: which values it at around $1.3 billion. Says one source: "I think if he had the right price for it, he'd sell it. But the right price has a three in front of it, and it's a heck of a long way from that now."
While ConsMedia continues to produce good returns, what brought the media Packer-whackers back out in force was the performance of the Crown casino assets.
The criticism has been that Packer lost much of his winnings from the PBL Media sale by investing billions of dollars of his shareholders' money in international casino assets at or near the top of the market.
There was the $1.45 billion 2007 joint venture with Macquarie Bank in Canada's Gateway Casinos group, the $US250 million Crown paid for a 19.6 per cent stake in US-based Fontainebleau Resorts. His biggest gamble of all was the $US1.75 billion Crown committed for 100 per cent of the Las Vegas-based Cannery Casino Resorts late in 2007.
Later there were Crown's minority investments early last year in US casino giants Harrah's Entertainment ($US150 million for a 2.5 per cent stake) and Stations Casino Group ($US200 million for a 4.9 per cent stake). In 2006, there was also a smaller $91.8 million investment for 50 per cent of Britain's Aspinalls casino group.
Some of the evidence of how much Crown overpaid for many of these assets is in the write-downs it has made in recent weeks.
Last week, Crown revealed the total of these one-off charges was $547.5 million. A total of $455 million of this figure was attributable to the Harrah's, Fontainebleau and Stations stakes: reducing their total combined value to about $100 million. Crown noted that it had "no obligation" to contribute further equity to these investments. A further $93 million was wiped off the value of the Aspinalls and Gateway investments in last week's result.
There are also fears of big write-downs on the value of the Cannery investment before Packer even settles on the investment. A regulatory hold-up in Pennsylvania -- where the casino group owns one casino -- has meant any fall in the value of Cannery since the deal was agreed late in 2007 has not yet been crystallised. The delay concerns Packer's sister, Gretel, and her reported concern about the release of private financial information about her, as part of the state's regulatory approval process for Crown to take over the casino.
A Crown statement to the Australian Securities Exchange last month maintained the company remained "committed to the Cannery acquisition", but the actions of Gretel Packer, and her motives, have certainly confused the matter.
Crown boss Rowen Craigie last week batted away questions on whether it would take write-downs on the Cannery assets if the Gretel Packer complication was ultimately resolved. However, he reportedly admitted it had bought the company at the "top of the market".
Others close to Packer maintain that the valuation of many of his US assets -- particularly the Gateway, Fontainebleau, Stations and Harrah's stakes, which are now virtually written down to zero -- accounts for a worst-case scenario.
Still, sources suggest that in his private moments, James Packer is still annoyed with himself about the US casinos play. "With 20:20 hindsight, he shouldn't have paid top dollar for those casinos," says one. "He's a tremendously disciplined person, and he punishes himself more than he punishes everyone else. I think he's a bit of a deal perfectionist."
While Packer's US play wades through a sea of red ink, the stakes could also not be higher for the company's high-profile casino company in Macau, Melco Crown Entertainment -- the joint venture he with local entrepreneur Lawrence Ho -- on which Crown is pinning much of its growth hopes. The company disclosed last week that its flagship property in the city, its $US2.1 billion City of Dreams casino, would open in June this year on Macau's popular Cotai strip.
It is the only new casino project opening in Macau this calendar year, and Crown anticipates it will benefit from "a reduced level of new supply coming into the market in the near future" from rival operators. Crown insiders describe the casino as having a "wow" factor, with a main entrance with round-the-clock shows and a water theme. The new casino will dwarf the size of Crown Macau, Melco's first casino in Macau.
While several analysts are positive about the opening, there are risks, with mixed views on how Macau casinos will perform. There are some projections of double-digit declines in overall Macau casino revenues for the remainder of the financial year, although Crown itself is optimistic the worst is over.
Crown also revealed last week that despite $US46.2 million in operating profit from Crown Macau, start-up costs from City of Dreams dragged Melco to a first-half loss. There are expected to be hundreds of millions of dollars more in construction costs and other expenses incurred before the new casino opens.
But one source close to Packer maintains most of the costs of building City of Dreams are not coming directly from Crown -- given that it only holds a 37.8 per cent interest in Melco -- and that its Macau exposure remains a positive for the business. "Crown has put in $US450 million for a business that has two casinos, its own licence that it bought from Steve Wynn -- one of only six in Macau -- and has bought two casinos fully funded. For all the criticism, it's actually not a bad investment. And much of the money has already been invested in businesses, where the full benefit has not been reaped."
But another long-time Packer associate is not so sure about Macau's position, a city that has seen the net worth of casino tycoons like Wynn and Sheldon Adelson shrink by billions. "My concern is the high rollers are gone," he says. "When there was the Asian economic crisis in the late 1990s, it was just the Asian crisis, and there were still high-rollers around. This time, it's global. And people are only going to Vegas for cheap seminars."
The powerhouses of the Crown business remain its wholly owned Australian casinos, Crown Melbourne and Burswood in Perth, which last week reported a combined 8.3 per cent growth in operating profit, in line with last year's rises. Packer insiders say Kevin Rudd's new $42 billion stimulus package is expected to be a bonanza for both of Packer's Australian casinos, as some consumers look to spend their $900 cash windfall in April on poker machines and gaming tables.
On Packer's private company front, Consolidated Press Holdings, those close to him are talking up the proposed sale of the bulk of his family's farming assets built up since 1983 -- the year Kerry Packer decided he wanted "a cattle station up north" soon after suffering one of his heart attacks.
Sources this week told The Weekend Australian that the $425 million sale of most of Consolidated Pastoral's 17 properties in the Northern Territory, Queensland and NSW -- which now includes 300,000 cattle on 5 million hectares -- to British private equity group Terra Firma was likely to complete within the next couple of weeks.
It is believed ConsPastoral has a current annual operating profit before depreciation and amortisation of about $24 million to $25 million, implying the sale is being conducted on a multiple of upwards of 17 times earnings. To use a cattle analogy, this multiple would, if true, represent bull market prices for the assets -- and those close to him say it shows Packer can still pull off a deal.
One close Packer associate says the deal reflects a new outlook for Packer where he releases cash and maximises returns. "I think he's clearly acknowledged he's got to hunker down, and realise cash for assets where he receives good value for them."
The source says Packer's biggest ally in weathering the global economic crisis is his unemotional attitude to investments. "He has an admirable lack of sentiment in recognising what has to be done. There will be no more acquisitions. He has to take his medicine until the market turns." (Credit: The Australian)
Greg Tingle comment...
It's tough being the son of the legend, even if your a billionaire. James Packer did inherit an empire and he paid his dues via listening and learning from his father, and even working on Newcastle Waters Cattle Station for years, and of course receiving the private education at Cranbrook, Sydney. On education, Kerry Packer once famously said, "Why would he want to go there (university)? To learn to smoke marijuana? At his father's funeral he said, 'Dad was my mentor and my teacher, but above all, he was my father and that is my greatest fortune..."
In recent years James Packer has found out for himself how tough business is and I believe it's true that the Australian (and international) news media doesn't fear the potential repercussions by writing about James Packer and the family as much as they once did for his late father. Let's not forget for a second that "they" were nicknamed 'The Goanna' by the Costigan Commission, with a list of allegations that Kerry flatly denied, and they are not worth repeating here, but a couple of the themes are covered on Network Nine's 'Underbelly' in relation to the casino, gaming and racing industry.
Insiders close to the James Packer situation almost universally agree that he's appears to have made two main business mistakes... the One.Tel telco fiasco in Australia back in 2001. One.Tel was a 1 billion dollar mistake. The other more recent mistake being buying land based casinos in the Las Vegas and Macau regions (at top dollar), but James was not to know the ass would fall out of the market. Some analysts say some of the casino investments are worth next to nothing. Hang on, wouldn't James Packer be paying people for good advice on what to buy, what not to, and how much to pay? Packer didn't have a luxury of a crystal ball.
The good news for Packer and the rest of us is that history shows us that global recessions don't last forever, or do they? The global economy has been punishing Packer for the past few years and it's largely matters which are outside his control, so I think the Australian's press should give him a break and try to reflect a more balanced approach to journalism in regards to covering the business of being James Packer. Australia does have that "tall poppy" syndrome, but frankly, the I think the digs at James Packer are getting pretty tied and long in the tooth. I wouldn't want to be their next target, but there's smarter than to do that anyway.
In a recent wise and generous decision, James Packer's Crown Casino and Burswood Casino's donated $500,000 to assist with the Victorian Bushfire relief effort, also supported by The Shane Warne Foundation and The Salvation Army. I affectionately refer to the casino identities as the 'Gumleaf Mafia', a term open to interpretation. In any effect its great to see money largely raised by the usually lucrative gaming industry being put to good use and be poured back into Australian society where its needed the most. Interesting enough Australia's press was unusually quite on the matter, despite some personal phone calls from I to the Australian Financial Review, however Gambling911 was very quick to report the good news, with CAP and Poker News Daily later following suite. The press seemed more interested in the crashing of the Commonwealth Bank website which caused me to deposit some money in the wrong account! Just imagine if it had been Packer's mistake, you wouldn't hear the of it.
Packer, if your reading this, and we know you will get to it eventually via the Bush Telegraph, don't listen to the knockers. Your a champion bloke with a beautiful family. Hang in there, things will pick up, and just keep enjoying life you tough and likable Aussie bastard.
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