2nd UPDATE: Genting Looks to Raise Echo Stake; Bidding War Looms

-- Genting applies to increase stake in Australia's Echo Entertainment

-- Application to lift stake above 10% limit

-- Genting currently holds 9.9% of Echo Entertainment

-- Latest development sparks speculation about possible bidding war for Echo between Genting and billionaire James Packer

(Recasts 1st paragraph, adds background throughout.)

 
   By Gavin Lower 
 

MELBOURNE--Speculation that a bidding war could erupt over Echo Entertainment Group Ltd. (EGP.AU), which holds an exclusive license to operate casinos in New South Wales state until 2019, is growing as Malaysia's Genting Bhd. (3182.KU) and billionaire James Packer are now both looking to increase their holdings in the company.

Echo, which owns of four casinos, including The Star in Sydney and Jupiters on the Gold Coast, and has a market capitalization of close to 3 billion Australian dollars (US$3 billion), has been seen as a takeover target since it was spun out of wagering group Tabcorp Holdings Ltd. (TAH.AU) last year.

Buying Echo would help Genting build a regional footprint with access to Sydney, which hasn't effectively tapped the Asian VIP gaming market. Echo's casinos--the other two are in Brisbane and Townsville--are located in Australian cities where Genting has attempted to win licenses previously.

Meanwhile, Echo would be attractive to Mr. Packer as he wants to operate a new casino in Sydney.

The latest development came when New South Wales state's Independent Liquor & Gaming Authority and Queensland state's Office of Liquor & Gaming Regulation said in separate statements Tuesday that Genting had applied to increase its stake in Echo to more than 10%.

Echo's constitution says a shareholder can't hold more than 10% of the company without approval from regulators in the two states.

As of June 19, Genting's Singapore and Hong Kong units had taken a combined 9.9% stake in Echo, according to a regulatory filing by Genting Singapore.

James Packer's Crown Ltd. (CWN.AU), which operates casinos including Crown in Melbourne and Burswood in Perth, is also seeking approval to increase its own 10% interest in Echo.

A spokesman for Echo Entertainment declined to comment on Genting's move.

A spokesman for Crown couldn't be reached for comment and a spokeswoman for Genting declined to comment.

Echo Entertainment's shares closed Tuesday down 0.2% at A$4.18 while the benchmark S&P/ASX 200 was 0.4% lower.

Genting has plenty of chips to play after another of its subsidiaries raised over US$1.8 billion this year. Genting Singapore announced a bond issue in April worth up to 700 million Singaporean dollars (US$546 million) after raising S$1.8 billion in February. Both fund raisings happened despite the company having a healthy balance sheet.

Speculation that a move on Echo by Mr. Packer could be imminent intensified last week when he endorsed a bid by News Corp. (NWS.AU) for Consolidated Media Holdings Ltd. (CMH.AU). Mr. Packer is the cable television company's largest shareholder and successful completion of that deal would give him around A$1 billion to play with. News Corp. owns Dow Jones Newswires and The Wall Street Journal.

Write to Gavin Lower at [e-mail]