Crown Resorts further reduces stake in Melco Crown
Crown Resorts Ltd is further reducing its stake in Asian casino developer Melco Crown Entertainment Ltd, the Australia-based casino operator said on Friday.
The announcement came just one day after the firm stated it was selling 13.4 percent of Melco Crown’s outstanding shares to joint venture partner Melco International Development Ltd, a Hong Kong-listed firm headed by Lawrence Ho Yau Lung. Following the operation, Melco International will own 51.3 percent of Melco Crown.
Melco Crown operates casino resorts in Macau and in the Philippines.
Crown Resorts – controlled by James Packer (pictured) – said in a Friday filing to the Australian Securities Exchange it would further reduce its stake in Melco Crown to 11.2 percent, with 5.5 percent held through a cash-settled equity swap. Combined with the planned sale of 13.4 percent of Melco Crown announced on Thursday, Crown Resorts said it would receive total proceeds of AUD1.9 billion (US$1.4 billion).
In Friday’s announcement, Crown Resorts stated it had entered into an underwriting agreement to sell 40.9 million shares in Melco Crown – around 2.8 percent of the latter’s outstanding stock – to institutional investors for US$5.33 per share. Deutsche Bank Securities, UBS Investment Bank and Morgan Stanley were arranging the deal, which is expected to be completed by December 20.
The Australian firm said as a result of the extra sale of Melco Crown shares, it would boost the size of a planned share buyback by AUD200 million to AUD500 million. It would also up the size of a special distribution by AUD100 million to AUD600 million.
At the start of May this year, Crown Resorts and Melco International each held a stake of 34.3 percent in Melco Crown.
Selldown positive for Melco Crown: analysts
Japanese brokerage Nomura said in a note on Crown Resorts’ decision to slash its stake in Melco Crown, that “both companies probably have an interest in pursuing separate development opportunities in Asia (Japan, as an example), so the less connected they are the better”.
Wells Fargo Securities LLC said it did not expect Crown Resorts’ share sale to have an impact on Melco Crown’s day-to-day management. “[Crown Resorts] had become a passive shareholder, with Crown Resorts’ representatives having stepped back from operational and executive roles over recent years,” analyst Cameron McKnight noted. “For all intents and purposes, Melco Crown had been run solely by Lawrence Ho and his management team,” he added.
Christopher Jones of the Buckingham Research Group Inc stated the selldown by Crown Resorts was “positive” for Melco Crown.
“With VIP diminishing in its importance in Macau and recent arrests of Crown [Resorts] executives [in mainland China], we believe the Crown brand has been an overhang on Melco Crown,” Mr Jones said. “With Crown [Resorts] selling down their stake, we believe that Melco Crown will slowly move away from the Crown brand, capitalising on its City of Dreams brand and other new concepts.”
In October, several individuals linked to Crown Resorts were reportedly detained in mainland China, in a case said to be in connection with investigations into alleged illegal gaming-related marketing activities on the mainland. Several investment analysts stated in notes commenting on the case that the detentions were connected to marketing activities for the recruitment by Crown Resorts of high-value players in mainland China. The company has not commented on the work of the people detained.
Brokerage Sanford C. Bernstein Ltd said “Crown Resorts’ sales should not be taken negatively as the read through should not be that Crown Resorts is bailing on Macau. Instead, the selldown is related to Crown Resorts’ own internal restructuring and change in strategy.”
Sanford Bernstein analysts Vitaly Umansky, Zhen Gong and Yang Xie added that – following the latest shareholder restructuration – Melco Crown could consider re-domiciling its listing from Nasdaq to Hong Kong. “Moving the listing to Hong Kong will be value creative (as long as the stock no longer trades in Nasdaq). Currently, Melco Crown is an orphan stock with many U.S. investors preferring to invest in Las Vegas Sands Corp or Wynn Resorts Ltd to gain Macau gaming exposure,” the Sanford Bernstein team wrote.
Melco Crown previously was listed both on the Nasdaq and in Hong Kong. But the firm withdrew its listing on the Hong Kong Stock Exchange in July 2015.
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