Echo Entertainment has denied it is in turmoil after chief executive Larry Mullin joined a management exodus and quit amid concerns about the casino operator’s balance sheet.
The latest departure was described as alarming by some observers and leaves Echo more vulnerable with shareholder James Packer and his rival casino operator Crown pushing to take control.
Echo chairman John O’Neill insisted the decision was a mutually agreed one and was made because the job was to become more of an operational one in the short-term.
However the decision appears to not have been a unanimous board one, following director Brett Paton’s sudden resignation earlier this week in which he strongly praised Mr Mullin.
Mr O’Neill said if Echo was going to change leadership, now was the time.
Echo was moving into a significant operational period of improving performance and getting returns on its investment in Star, he told an analysts briefing on Thursday.
“There’s no chaos around the board table,” he said.
The company is close to completing an $870 million redevelopment of Sydney’s Star casino including upgrading its VIP and retail and entertainment facilities, largely driven by Mr Mullin.
Mr Mullin, a US native, had a remuneration package last year worth more than $2.7 million, including a $5,000-a-week living away allowance and 12 return business class tickets home a year.
He oversaw an 81 per cent plunge in net profit in 2011/12 and $30 million in writedowns associated with Echo’s high rollers business, largely because of unpaid debts when a partner collapsed into liquidation.
Star’s manager Sid Vaikunta was sacked following sexual harassment allegations this year and Echo chairman John Story stood down following a campaign to remove him by Mr Packer.
City Index chief market analyst Peter Esho said abrupt resignations like Mr Mullin’s on Thursday often precipitated bad news on the earnings front.
“I wouldn’t be surprised if the market’s earnings estimates are too high for 2013, the market is assuming a big turnaround from last year, because of the big writedown,” he told AAP.
Crown holds a 10 per cent stake in Echo, and is seeking regulatory approval to raise that to 25 per cent and increase its influence on its rival, which holds Sydney’s sole casino licence.
Malaysia’s Genting Group is also seeking a higher ceiling on its shareholding.
Mr O’Neill said he had not spoken to either company about a deal, but Crown wants a joint venture with Star to build a rival casino and hotel at Sydney’s Barangaroo.
Crown has an exclusive option with Lend Lease for the project, but it has a two-year time limit and requires Star’s casino licence.
Fat Prophets Greg Fraser said he saw that project as still speculative because of the legal hurdles and time involved.
“If you were Larry Mullin wouldn’t you be thinking: that’s two years under my belt, potentially, to really build up the earnings of the Star as a virtually brand new casino and get a head start,” he told AAP.
He said he expected Crown to make a takeover bid with Echo’s position now weakened and needing to replace two board members.
A possible replacement is chief financial officer Matt Bekier, but it has been reported he tried to leave Echo earlier this year.