James Packer: From Macau's Casinos to Hollywood - 3rd April 2014
Packer, who handed over full control of ACP to James in 1998, waged millions of dollars at a time at racetracks and casinos. The country's biggest punter, he owned his own casino: the Crown in. In late 2004, Packer put in about $211 million of what would grow to be an overall investment of $770 million into Melco Crown Entertainment, the joint venture with Lawrence Ho's Melco. Yesterday's acquisition of Cannery Casino Resorts - whose principal, Bill Paulos, was hired by Kerry Packer to run Crown in Melbourne when it first opened in the early 1990s - comes a week after a.
Profiles
Image: Robert Gallagher for Forbes, Grooming by Karina Moore
Brett Ratner (left) and James Packer
The legendary Kerry Packer lost a big chunk of his fortune at America's gambling tables. His son, James, has hit the jackpot by owning the casinos. Now he's rolling the dice on Hollywood.
Slumped in white oversize chairs in an enormous suite at the Hotel Bel-Air in Los Angeles, Australian casino billionaire James Packer and Hollywood movie director Brett Ratner are exhausted. They look like two hungover frat boys after a hard night—but these guys haven't been partying. They're jet-lagged after visiting Russell Crowe's film set in South Australia, watching Chinese tennis star Li Na win the women's Australian Open in Melbourne and toe-touching in the Philippines to open Asia's first Nobu restaurant at a new casino resort in Manila.
It sounds like a pleasure cruise from Packer's earlier life as the polo-playing, jet-setting 'Jamie', son of the late media mogul Kerry Packer. In fact, it's all business. Li Na is an 'ambassador' for Packer's flagship Crown Casino, which spreads across two city blocks on the banks of Melbourne's Yarra River. The Manila resort is Packer's first major casino foray outside of Australia and Macau. And Russell Crowe's directorial debut, The Water Diviner, is financed by Packer and Ratner's new Los Angeles-based film company, RatPac Entertainment, a Sinatra-inflected portmanteau of the two men's surnames.
At 46, Packer is finally emerging from his father's long shadow to come into his own as Australia's second-richest person, with an estimated fortune of $6.5 billion. Sure, there are remnants of the flashy playboy lifestyle, including supermodel girlfriend Miranda Kerr, whose three-year marriage to English actor Orlando Bloom ended in October. (Packer split from his second wife, pop singer and model Erica Packer, née Baxter, in September, just weeks after the family moved into their Sydney mansion following a reported $35 million renovation.) By and large, however, Packer is increasingly regarded as a serious and successful businessman in his own right. He also has three children, aged 18 months to 5 years, who now live with Erica in Los Angeles, so he's spending plenty of time on America's West Coast.
'I had a marriage breakdown last year,' he says, after giving daughter Indigo, 5, a big snuggle before she trots of with her nanny to bed. 'The last thing I think I am is perfect. I'm just trying to do the best job I can. I'm trying to be the best father I can to my kids. I'm trying to do the best job I can running my business.'
It's been a bumpy ride. When Kerry Packer died in 2005 at age 68, his only son inherited a $5 billion fortune, mainly tied up in Australian magazines and television. At age 38, James Packer, who had been caretaking the family's sprawling businesses for several years as his father's health failed, was in full control. He moved quickly to reshape the Packer empire, selling most of his father's beloved media properties to Hong Kong-based private equity firm CVC Asia Pacific for $4 billion in two deals across 2006 and 2007. The timing was perfect: He got out just as the internet began decimating traditional media's revenue and profits.
Then he almost blew it. Packer plowed a big chunk of the cash from the CVC deal into casinos in Las Vegas, Pennsylvania and Canada, just before the global credit crunch. 'I lost a bunch of money in America because of the financial crisis,' he says. Estimates of his losses go as high as $2.6 billion—roughly half of his fortune—and plenty were lining up to write his business obituary. Those losses included writedowns on investments in Fontainebleau Resorts, Station Casinos and Harrah's (all in Las Vegas), as well as an ambitious but abandoned plan to build Crown Las Vegas.
Image: Don Arnold / Getty Images (left); Gregg Deguire / Wireimage
Packer models '13 and '14: Erica Packer (left); Miranda Kerr
Was he worried that the debacle would destroy three generations of Packer wealth creation? 'I don't want to answer that.' He will, however, share the biggest lesson he learned from that dark period. 'Don't be too leveraged—our balance sheet is now much more conservative than it was in 2008,' he says.
Las Vegas damaged more than Packer's wallet. If the CVC deal showed he could be on occasion as shrewd as his legendary father, his North American shocker had him scrambling—again—to prove he could fill those huge shoes. Although Kerry Packer, too, had his share of business failures, he built a reputation as Australia's most powerful and formidable businessman, owning the country's leading television network and its biggest stable of magazines. He was most famous for selling his television network to fellow Australian entrepreneur Alan Bond for $700 million in 1987 and then buying it back for just $240 million three years later. 'You only get one Bond in your lifetime, and I've had mine,' he gloated publicly.
Packer père was an old-style media baron with the domineering personality to match: A sometimes ruthless, foulmouthed bully who could also be charming, generous and funny. Every staff member received a generous Christmas basket, but those who displeased him also got the 'Packer treatment', an expletive-laden verbal dressing-down. The Australian public loved him for his sports-loving, one-of-the-boys persona and his laconic one-liners. When his heart stopped for several minutes in 1990, he told reporters that he'd been to the other side and 'there's f---ing nothing there'. He then donated around $2 million to have defibrillators fitted into New South Wales ambulances, which came to be known as 'Packer Whackers'. By the time Kerry Packer died, he was Australia's richest person, having built an estimated $100 million media business, which he inherited at age 37 from his father, Sir Frank, into a dominant broadcasting and publishing empire worth $5 billion.
James Packer made several great business calls before his father died but failed to shake the public's perception of him as a bit of a dilettante and playboy. He championed the Packers' acquisition of Melbourne's Crown Casino in 1998, which became the foundation stone for their post-media fortune. He was ahead of most in betting on the rise of the internet, setting up Australia's first major online news portal in 1998 and investing early in online car-sales and job-seeking sites. All three netted his family big profits. But these well-timed deals drew far less publicity than his biggest business flop (before Las Vegas), a disastrous foray into telecommunications. He and his good friend Lachlan Murdoch, son of Australia's other media tycoon, Rupert Murdoch, invested heavily in One.Tel, which rapidly grew to become Australia's fourth-largest telecom, before collapsing spectacularly in 2001 amid poor management, non-competitive pricing and legal issues. Although the Packer family's $170 million haircut on One.Tel was a fraction of the Las Vegas loss, it probably hurt Packer more, since his famously abrasive father was still around to see the debacle—and lash him for it.
Shortly after the One.Tel misery, James Packer's first marriage, to Australian swimsuit model Jodhi Meares, ended, and a depressed Packer fed the spotlight, flirting briefly with Scientology through his friendship with actor Tom Cruise. Seven years later, the Las Vegas near-death experience was another confidence-sapper. Luckily for Packer, though, he'd also invested in casinos in Macau—the special administrative area of China that now generates seven times the gambling revenue of Las Vegas—and this move proved his redemption. Crown put $600 million in Macau; it is currently worth $8 billion.
Las Vegas damaged more than Packer's wallet. If the CVC deal showed he could be on occasion as shrewd as his legendary father, his North American shocker had him scrambling—again—to prove he could fill those huge shoes. Although Kerry Packer, too, had his share of business failures, he built a reputation as Australia's most powerful and formidable businessman, owning the country's leading television network and its biggest stable of magazines. He was most famous for selling his television network to fellow Australian entrepreneur Alan Bond for $700 million in 1987 and then buying it back for just $240 million three years later. 'You only get one Bond in your lifetime, and I've had mine,' he gloated publicly.
Packer père was an old-style media baron with the domineering personality to match: A sometimes ruthless, foulmouthed bully who could also be charming, generous and funny. Every staff member received a generous Christmas basket, but those who displeased him also got the 'Packer treatment', an expletive-laden verbal dressing-down. The Australian public loved him for his sports-loving, one-of-the-boys persona and his laconic one-liners. When his heart stopped for several minutes in 1990, he told reporters that he'd been to the other side and 'there's f---ing nothing there'. He then donated around $2 million to have defibrillators fitted into New South Wales ambulances, which came to be known as 'Packer Whackers'. By the time Kerry Packer died, he was Australia's richest person, having built an estimated $100 million media business, which he inherited at age 37 from his father, Sir Frank, into a dominant broadcasting and publishing empire worth $5 billion.
James Packer made several great business calls before his father died but failed to shake the public's perception of him as a bit of a dilettante and playboy. He championed the Packers' acquisition of Melbourne's Crown Casino in 1998, which became the foundation stone for their post-media fortune. He was ahead of most in betting on the rise of the internet, setting up Australia's first major online news portal in 1998 and investing early in online car-sales and job-seeking sites. All three netted his family big profits. But these well-timed deals drew far less publicity than his biggest business flop (before Las Vegas), a disastrous foray into telecommunications. He and his good friend Lachlan Murdoch, son of Australia's other media tycoon, Rupert Murdoch, invested heavily in One.Tel, which rapidly grew to become Australia's fourth-largest telecom, before collapsing spectacularly in 2001 amid poor management, non-competitive pricing and legal issues. Although the Packer family's $170 million haircut on One.Tel was a fraction of the Las Vegas loss, it probably hurt Packer more, since his famously abrasive father was still around to see the debacle—and lash him for it.
Shortly after the One.Tel misery, James Packer's first marriage, to Australian swimsuit model Jodhi Meares, ended, and a depressed Packer fed the spotlight, flirting briefly with Scientology through his friendship with actor Tom Cruise. Seven years later, the Las Vegas near-death experience was another confidence-sapper. Luckily for Packer, though, he'd also invested in casinos in Macau—the special administrative area of China that now generates seven times the gambling revenue of Las Vegas—and this move proved his redemption. Crown put $600 million in Macau; it is currently worth $8 billion.
Image: Warner Bros. / Album / Newscom
RatPac's first flick, the sci-fi thriller Gravity, has been nominated for 10 Academy Awards, including Best Picture
'I've now got more of my money in China than anywhere else, more probably than in Australia,' he says. His private company, Consolidated Press Holdings, owns a fraction over 50 percent of Crown Resorts, one of Australia's top-performing stocks last year, leaping $3 billion in market capitalisation to $11 billion. What has the market excited is Crown's 33.7 percent stake in Melco Crown Entertainment, a joint venture run by Lawrence Ho, the son of Macau casino tycoon Stanley Ho. It is Melco that has taken Packer into Macau, where the pair are opening a third casino in mid-2015, and also into the Philippines, where City of Dreams Manila opens later this year. Japan, too, is on the agenda if casinos are legalised before the 2020 Tokyo Olympic Games. Outside of the Melco joint venture, Crown owns casinos in Melbourne, Perth and London, and has approvals for huge casino resorts in Sydney and Colombo, Sri Lanka.
That Packer has hit the jackpot as the 'house' is a twist on his heritage. Kerry Packer was a renowned whale, punting millions at blackjack, poker and baccarat tables around the world. He famously once said, 'Toss you for it,' to a Texas millionaire at a Las Vegas casino who was boasting about his wealth.
'As a kid, I saw that dad lost a lot of money in casinos, and I didn't understand that,' he says. 'I thought this must be a great business. At the same time, I saw when I was with him—and I was with him a lot of the time—that this was a really cool business, and it was fun and glamorous. As I got older, I realised that he knew what he was doing. He was prepared to spend some of the money that he made to make himself feel better by giving himself an adrenaline rush. … Some of the happiest times I ever saw my dad was times when I was with him in the casinos and he had a good night.'
Does he wish his father were still around to see his current successes? 'But then he would have also seen me in 2008,' Packer counters, presumably grateful not to have had to face paternal wrath over Las Vegas. He's also mindful of his father's urging to be realistic about business: 'You're never as good on your best day as everyone thinks, and you're never as bad on your worst day as everyone thinks.'
Still, Packer concedes that with Macau he has hit the jackpot. Melco Crown, one of six companies with a Macau casino licence, has roughly 14 percent of the market.
'The business in Macau is going amazingly; I've been very lucky that it has been more successful than I would have thought possible,' he says, attributing much of that success to the work of Melco Crown co-chairman (with Packer) and chief executive Lawrence Ho.
The pair joined forces in 2004, bonding over a shared background of powerful billionaire fathers. 'Our fathers [were] legendary businessmen,' Ho says. 'In a certain way, they inspired us and also motivated us to do things even better and bigger.' More important, though, for Ho is Packer's '100 percent trust and faith' in him, even through tough times. They faced a baptism of fire when their first project, the upmarket but poorly located Crown Macau (now renamed Altira), got off to a slow start in 2007. Then their second Macau venture, the $2.4 billion City of Dreams, opened in 2009. Unlike the Las Vegas gamble, however, Macau came good, with City of Dreams focusing on the mass market. Melco Crown also holds a 60 percent stake in a third Macau casino project, the $2 billion Studio City on the Cotai Strip, due to open in mid-2015 with a movies theme (and with obvious potential tie-ins to Packer and Brett Ratner's RatPac Entertainment).
'Trust' is a word that Ratner also uses to describe his relationship with Packer. 'I know he predominantly bets on the person,' says Ratner, who directed the Rush Hour film series and X-Men 3: The Last Stand. 'His belief in Lawrence Ho and, of course, myself gives his businesses the confidence to excel.'
While Packer's growing casino interests are his main focus—and the reason his fortune is up by nearly $2 billion in two years—it's clear that RatPac, formed in December 2012, is not just a rich man's dabble in a glamorous industry. 'The casino business and the movie business are similar,' Ratner says. 'What you're selling is an experience. You're selling adrenaline.' In September, RatPac closed a $450 million deal with Warner Bros to co-finance up to 75 films over four years. If things go well, Ratner says, the financing could top $1 billion. Their first film Gravity has been a huge hit.
Now RatPac is moving beyond the movie business into TV, book publishing and documentaries, and especially into China and India. The ultimate aim? A global brand focussed on Asia's growing middle-class thirst for entertainment. Exactly like Packer's Crown Casino empire.
'The thing that was at the centre of our thinking all along is the rise of China,' says Packer. 'I think ten years from now a bunch of studios will say, ‘Why didn't we do more in China?'?' Outside of the Warner deal, RatPac closed a three-year deal in December to help pay production costs on movies made by Brad Pitt's Plan B Entertainment and will finance films by Cameron Crowe, Warren Beatty, David Fincher and Roman Polanski. It is also producing a Horrible Bosses sequel and Hong Kong Phooey, starring Eddie Murphy. 'The point is, we are ambitious enough, whether foolish or smart, to want to participate in the development of our own content,' Packer says.
RatPac's broader media strategy includes buying one or more TV production companies, creating documentaries with Netflix and publishing Ben Mezrich's (Bringing Down the House, The Accidental Billionaires) next book. In some ways, it's a return to Packer's media-company heritage but with a 21st-century spin. 'I don't think I ever got out of the media business,' he says.
Macau Casino News
For now, Packer looks to be on a winning streak. If RatPac proves to be another Macau, there's little doubt he will perhaps surpass his father's achievements. He also has high hopes for his other US play, a 9.35 percent stake in real estate portal Zillow, bought for $250 million. And clinching approval last November for a controversial $2 billion casino resort in hometown Sydney was a defining moment for the 'new' Packer, giving him the chance to make his own mark on the city his father once dominated. But he's used to placing big bets and sometimes getting stuck with a losing hand. 'I've made a bunch of mistakes in my life. I've had my ups and downs,' he says. 'Business is good right now, but now my personal life is a disaster.'
REPORTER: Mr James Packer and Mariah Carey!
GRACE TOBIN, REPORTER: In a world where cash is king, James Packer has always had plenty of it - thanks to the company he inherited from his father.
JAMES PACKER: I spent a lot of time in casinos as a kid with my dad and I ended up thinking (BLEEPED) this must be a good business.
GRACE TOBIN: Packer took a punt on the casino business and it paid off. Crown conquered the Australian market before Packer set his sights on China and its high roller market.
JAMES PACKER: Ladies and gentlemen, I have made many mistakes in my life but investing in China is not one of them.
GRACE TOBIN: In China, Crown's business model was aimed at enticing rich Chinese gamblers to its Melbourne and Perth casinos.
DAMON KITNEY, BIOGRAPHER: Gambling is actually illegal in mainland China. So, he has seen the opportunity for his Australian casinos is very much to attract those Chinese gamblers to Australia.
GRACE TOBIN: James Packer's biographer, Damon Kitney, says Crown worked closely with local agents known as junket operators to find VIP gamblers.
DAMON KITNEY: It is quite an elaborate set-up, luxury hotel rooms, private jet trips, you name it.
And that's been the centrepiece, I guess, of the high roller business models for Crown, but all casinos.
GRACE TOBIN: Crown's plan to lure Asian high rollers to our shores grew even bolder in 2012 when James Packer won approval to develop an exclusive waterfront casino in Sydney to cater solely to VIP gamblers.
BARRY O'FARRELL, FMR NSW PREMIER (2012): The Crown proposal for a six-star world-class hotel and VIP-only gaming facility will proceed.
GRACE TOBIN: Barangaroo was Crown's shining jewel and the project got the royal treatment from the state government. Crown's bid was approved without a public tender.
DR JOHN HEWSON, FMR LIBERAL PARTY LEADER: I found it almost incomprehensible that they would award or make that decision, offer those approvals without a full, open, public, transparent tender.
GRACE TOBIN: Former federal Liberal leader, John Hewson, was scathing of the lack of scrutiny Crown received.
JOHN HEWSON: I mean it is almost unconscionable to imagine that a government would give a major privileged position without any public accountability, without any probity process at all.
GRACE TOBIN: The Crown empire seemed unstoppable.
But that all changed in 2016 when 19 Crown employees, including three Australians, were arrested in China for breaking gambling laws.
BILL BIRTLES, ABC REPORTER: Crown's immediate challenge is to support the employees who are about to spend another night behind these walls.
GRACE TOBIN: Crown was in turmoil - revenue from its VIP gamblers plunged, throwing the future of Barangaroo into question.
DAMON KITNEY: The arrests were a bit of a turning point for James Packer in his attitude towards Crown. He started to reduce his exposure to Crown, so he's been looking to sell part of his interest.
Kerry Packer Casino Macau Buffet
GRACE TOBIN: Since then, Crown's problems have only gotten worse.
In July last year, explosive allegations of money laundering and the company's links to Asian organised crime bosses were revealed by Nine's newspapers and 60 Minutes.
JUANITA PHILLIPS, ABC PRESENTER: Crown is under investigation for tactics used to lure Chinese high rollers to Melbourne.
GRACE TOBIN: Crown denied the allegations but the report sparked an inquiry in New South Wales which is now investigating whether Crown is fit to keep its casino licence for Barangaroo.
This is a high-stakes inquiry which could result in Crown losing its casino licence in New South Wales or facing heavy restrictions.
The most serious allegations being examined by the inquiry are that Crown breached gambling laws, engaged in money laundering, and partnered with junket operators who had links to organised crime.
The inquiry has been played CCTV footage showing bags of cash being deposited in the high roller rooms of Crown in Melbourne.
Crown CEO Ken Barton told the inquiry he didn't know this type of activity was even occurring in the casino until he saw the footage in media reports last year. His concession prompted a stinging assessment by the inquiry's commissioner.
PATRICIA BERGIN SC, COMMISSIONER: This is what's troubling me and so there has to be some more transparency because this, in effect, has really reached a debacle level.
GRACE TOBIN: The inquiry is also investigating allegations that two bank accounts operated by Crown were used for money laundering by drug traffickers.
Crown bosses are being questioned about whether they turned a blind eye to these types of transactions.
PATRICIA BERGIN: You do accept, do you not, Mr Johnston, that some of your junkets were connected to criminal elements?
MICHAEL JOHNSTON, CROWN DIRECTOR: It would appear that way, yes.
MARTIN PURBRICK: Well, I couldn't second-guess the executives in those companies, but if they have no idea that Macau casino junkets have a background in organised crime and have allegations of money laundering surrounding their business, then they clearly haven't looked at the internet or the news for about 20 years.
So, it does surprise me that casino executives wouldn't know that.
GRACE TOBIN: Martin Purbrick is a world-leading expert on Asian organised crime within the gambling industry. He says Crown should have had a more robust anti-money laundering system because setting one up is not that hard.
MARTIN PURBRICK: It's quite well-known whether you're in the casino business or the banking industry how to set up an appropriate anti-money laundering system, know your customer processes and then execute that.
So I would say it's negligence if any major business entity doesn't do that at this stage of development.
GRACE TOBIN: The inquiry has also heard that when the allegations were first made public last year, the company released an ad in newspapers and the Australian Stock Exchange, disputing the story and branding it a deceitful campaign.
At the inquiry on Friday, Packer's right-hand man, John Alexander, agreed that some parts of the board's response were inaccurate.
NAOMI SHARP SC, COUNSEL ASSISTING: Do you accept now that parts of this ASX media release are wrong?
JOHN ALEXANDER, FORMER CROWN DIRECTOR: I think some of the language could be refined, yes.
NAOMI SHARP: Well, parts of it are just wrong, aren't they?
Kerry Packer Casino Macau Casino
JOHN ALEXANDER: Essentially yes.
GRACE TOBIN: As Crown's largest shareholder, James Packer is due to give evidence tomorrow.
JOHN HEWSON: We still need full accountability. It's not too late. I mean, if James is going to go in and give evidence, then, you know, go whole hog. Ask for the lot.
GRACE TOBIN: Damon Kitney says the fact James Packer is fronting a public inquiry is extraordinary in itself.
DAMON KITNEY: This is quite unprecedented. A lot of people would remember his father's appearance, very famous appearance, before a broadcast inquiry into his media ownership at the time.
Kerry Packer Casino Macau Official Site
KERRY PACKER (1991): Kerry Francis Bullmore Packer. I appear here this afternoon reluctantly.
Kerry Packer Gambling
I am not evading tax in any way, shape or form. Now, of course, I am minimising my tax and if anybody in this country doesn't minimise their tax, they want their heads read, because as a government I can tell you, you're not spending it that well that we should be donating extra.
