Casinos operator Crown Resorts has fortified its position in Australia by winning a sweetened deal for its Melbourne casino from the Victorian government.
Crown has won an extension of its Melbourne casino licence, an increase to the number of table games and poker machines, and will pay less tax on VIP gaming.
In return for the amendments to its casino licence and management agreement, Crown will make extra payments to the Victorian government of up to $910 million.
Crown said the reforms would allow its Melbourne casino to compete more effectively with interstate and overseas casinos, boost tourism and create new jobs.
Crown Resorts chairman James Packer said that in the 10 years to 2016 Crown will have invested $1.7 billion to upgrade its Melbourne casino resort.
“Despite this investment, Crown has for a long time been at a major competitive disadvantage on the issue of taxation,” Mr Packer said in a statement on Friday.
“Now, with the support of the Victorian government, we will have a licence that enables us to compete on a level playing field to help drive tourism, jobs and economic benefit for the state.”
Morningstar analyst Brian Han said the revised Melbourne casino arrangements were unequivocally good for Crown.
The increase in the number of gaming tables, automated table games terminals, and poker machines would generate more money for Crown.
Most of the payments to be made to the Victorian government would be staggered over the next decade and some of them depended on the performance of the casino.
“When you work all that out, I think the benefits certainly outweigh the costs,” Mr Han said.
“More strategically, though, it really comforts people about the earnings power of this company (Crown) now that they have extended the casino’s term by 17 years.”
Mr Han said the scrapping of the super tax on VIP gambling would help Crown’s Melbourne casino compete with the big, luxury casino resorts of Macau and Singapore.
The new Melbourne casino arrangements would fortify Crown’s earnings base in Australia and help it with existing or proposed expansion projects in Sydney, Brisbane, Macau, Las Vegas, The Philippines and Sri Lanka.
Victoria Treasurer Michael O’Brien said the new deal would boost jobs, investment and tourism while improving Crown’s operations and market share.
“This is a very competitive industry,” Mr O’Brien said.
“We want to ensure that high rollers from overseas (VIP gamblers) find a reason to want to come to Melbourne to spend their money.”
Shares in Crown were 25 cents, or 1.56 per cent, higher at $16.23 at 1226 AEST.
CROWN’S NEW DEAL AT MELBOURNE CASINO
CROWN WILL GET:
* Licence extended by 17 years, from 2033 to 2050.
* “Super tax” on international VIP gambling removed from 2015.
* Increase in gaming tables from 400 to 440.
* Automated table games terminals up from 200 to 250.
* Poker machines up from 2,500 to 2,628.
CROWN WILL PAY:
* $250m once new casino licence and management agreement effective.
* $100m in 2023 if Melbourne casino annual revenue rises more than four per cent from 2014 to 2022.
* Extra $100m if revenue grows by more than 4.7 per cent.
* $250 million in 2033.
* At least $35 million a year in gaming taxes linked to new gaming product over six years from 2016.