Echo throws away the rule book
The rule of thumb, when one finds oneself the target in a takeover battle, is to appoint a defence adviser, look for a white knight and talk up one's strategic value in the media.
Echo Entertainment has proudly eschewed this rule of thumb. Instead, the owner of Sydney's Star City casino has its own special formula: announce a profit downgrade, raise equity, depress one's share price, refuse to engage with one's suitors, toss out one's chairman, John Story - the only bloke who stood up to one's adversaries - upset the government and be potentially stripped of one's gaming monopoly.
It doesn't get much better than that, if one is a short-seller, that is. The stock has been hammered.
In defence of chairman John O'Neill and his Echo board though, it must be said that the odds of a rival casino bobbing up a mere slingshot's distance from The Star must have once seemed long.
But O'Neill and his colleagues underestimated the government of New South Paraguay, sorry … Wales.
It emerged this week that the government of New South Paraguay, sorry … Wales, under El Presidente Bario Farrell, quietly watered down the tender rules just before they gave the go-ahead for Crown's high-rent gambling den - smack-bang in the middle of what was to have been a park.
With the connivance of both sides of government, Las Liberales and the equally feeble opposition, El Labor, this free licence to print money seems but a done deal.
No boring old tender process which would deliver hundreds of millions of dollars for the citizens of New South P… P… P… Wales.
Echo has committed the Seven Deadly Sins.
Lust: the seeds of its fall from favour with the state government were sown last year when sexual harassment claims against former chief executive Sid Vaikunta were leaked.
Wrath: the lurid claims left the Premier red-faced when his chief adviser was forced to quit over the leaks. Relations between Macquarie Street and Echo had never been so poisonous.
Pride: this has been the most deadly of Echo's transgressions. There was no attempt to find a white knight. Overtures from Singapore casino operator Genting, which bought into Echo and might have helped to force a higher price from James Packer's Crown, were spurned. Echo went it alone.
Packer meanwhile was busy engaging with all and sundry, ensuring the politicians were obliging and the press fawning. From the media coverage you could be forgiven for thinking they were building an eco-friendly aged care facility.
Sloth: Echo was too slow off the mark in dealing with Lend Lease, which has dibs on the Barangaroo site across the water. They were outmanoeuvred strategically.
Greed: directors still voted to lift their pay this year, though earnings dropped like a stone (earnings per share down from 31.4¢ to 5.9¢).
Envy: rather than galvanise them to action, the incursion from Packer and the Singaporeans spurred the Echo directors to an internecine struggle for board control.
Chairman John Story was knifed by the executive directors faction, who deemed him on the nose with government. Then CEO Larry Mullin, deemed to be on the nose with James Packer, was run through by the O'Neill faction. Former O'Neill ally and banker Brett Paton then left to clear the air.
Gluttony: OK, gluttony is a stretch. We admit the Seven Deadly Sins is a low-brow journalistic device to market this story. We can really only get to six.
But there is a gluttony angle, notably that Genting clearly bit off more than it could chew. The Singaporeans bought 5 per cent of Echo, then another parcel to get a stake of just under 10 per cent.
Yet they soon found they were not allowed to swap the two stakes into one vehicle for voting purposes, so they had to quit almost half their stake on market.
Notwithstanding this Mister Magoo moment, and the present Crown ascendancy, this game has a long way to go. Genting still lurks there with its 5 per cent. Crown doesn't have a licence yet, it has a $38 million right to negotiate exclusively with Lend Lease for two years.
As for Echo, there would surely be a document floating about which would lend the basis for a legal challenge. It still has exclusivity on its long term deal until 2019.
It is early days. And John O'Neill met with UBS investment banking heavyweight and Packer mate Matthew Grounds just the other day.
NB: Apologies to Luis Federico Franco Gomez, the President of Paraguay, for any hurt which may have been caused by the imputation that the government of Paraguay may have engaged in crony capitalism.
On Monday morning, Justice Jayne Jago hands down her judgment in the action by local councils against Standard & Poor's, ABN Amro and others.
S&P had slung its once-cherished Triple A credit rating on some toxic credit instruments called "Rembrandt" CPDOs. They blew up six months later.
Apparently some $200 billion of these masterpieces were sold worldwide, not Rembrandts but CPDOs that is, and there was a defect in S&P's modelling of the volatility in the products.
If the court finds against the ratings agency in Australia, it will not only be the first adverse judgment against S&P worldwide, but it may also open up S&P to a further $200 billion in claims. In 48 hours, the eyes of the credit world will be fixed.