Packer gets his opening

I wrote a few weeks ago that James Packer officially has his mojo back. And it’s the fight for control of casino group Echo that has got him inspired.

Packer is a man who goes out of his way to avoid talking with the media, but in recent weeks he’s been freely commenting to newspapers, appearing at public events and going on national television (on the Nine Network, of course) to push his case.

Echo, which owns The Star casino in Sydney and casinos in Queensland, is Packer’s ultimate prize, but his main target, in the business press at least, has been the company’s chairman, John Story.

This week he increased the pressure on Story by calling for an extraordinary general meeting and suggesting former Victorian premier Jeff Kennett could replace him. Packer has also taken out a series of full-page newspaper ads to push his case.

If you were Story, your best tactic is probably to keep your cool, keep out of the media and work to garner the support of shareholders behind the scenes. Engaging Packer in a public fight is somewhat dangerous, given the big man has seized control of the story so effectively.

If you were Story, the worst possible thing you could do would be to call attention to any problems with the way Echo was being run on your watch.

Which is exactly what Story has done. Last night, Echo flagged a $30 million writedown and problems with its core domestic casino business.

The collapse of a VIP junket operator (a company that arranges for high rollers to gamble in Echo casinos) had left the company with $29.9 million in bad debts. The negative media attention and management changes that resulted from a scandal around the departure of The Star’s general manager also hit third-quarter turnover, Echo revealed.

If Echo investors were looking for a brilliant defensive response to Packer from Story and his board, this wasn’t it.

“Another writedown from a John Story-led company,” Packer told The Australian Financial Review. “If this wasn’t so serious, it would be a joke. He has to go.”

You can almost sense Packer is having a bit of fun with all this, can’t you?

Certainly Packer and his team would have been hoping Story would slip up and last night’s announcement will add weight to their campaign for change. Other Echo investors will still be looking for a suitable takeover premium from Packer, but you’d have to think they would be more receptive to his push today than they were at the start of the week.

Story has accused Packer of using a play from Kerry Stokes’ book in his attack on Echo – take aim at the chairman and keep whacking away until the board gets tired and gives in.

Story says other shareholders he’s spoken to have expressed “exasperation and irritation” with Packer’s ploys and he’s prepared for a “continuing war of attrition”.

Fair enough – you get the sense that if it’s a war Story wants, then Packer is happy to oblige.

Of course, Story should also realise that shooting yourself in the foot with writedowns won’t make that war any easier to fight.