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Crown Resorts to split overseas business from domestic

Jun 15, 2016 Newsdesk Latest News, Macau, Top of the deck, World  


Crown Resorts to split overseas business from domestic

James Packer’s casino firm Crown Resorts Ltd plans to put most of its business interests located outside Australia into a new listed vehicle. It will also explore a potential initial public offering (IPO) for a property trust that would include all of the company’s Australian hotels, except Crown Towers in Melbourne in the state of Victoria.

“Following the proposed demerger, investors will have the opportunity to invest in Crown Resorts which will own and operate Australia’s pre-eminent integrated resorts, with exciting developments such as Crown Sydney,” said Robert Rankin, Crown Resorts’ chairman, quoted in a filing to the Australian Securities Exchange on Wednesday, which announced the planned corporate rejig.

“Investors will also have the opportunity to invest in a separate company which will own a number of Crown Resorts’ international investments and provide exposure to the major gaming markets of Macau, Las Vegas and the U.K.,” added Mr Rankin.

Crown Resorts would keep a 51-percent stake in the proposed property trust, said the filing.

According to Wednesday’s announcement, Crown Resorts currently holds a 27.4 percent interest in Asian casino developer Melco Crown Entertainment Ltd, having reduced its stake earlier this year. Melco Crown – a venture with Hong Kong-listed Melco International Development Ltd, and which is led by Melco International’s Lawrence Ho Yau Lung – has much of its infrastructure investment in the Macau market.

Investment bank Morgan Stanley said in a report on Wednesday that it expected the Australia casino VIP gambling market to outperform significantly – in growth rate terms – the Macau market in 2016. It expected the Australian VIP market’s revenue to expand by 5 percent year-on-year, compared to a likely 16 percent contraction of such revenue in Macau.

The bank’s report added that globally, China was an important source market for VIP gamblers, but that a report by the bank, issued in December, had concluded that “China’s anti-extravagance campaign, launched in late 2012, was the major cause of the VIP downturn in Macau”.

Crown Resorts’ Australian casino operation is known in the industry for its focus on VIP gambling business.

“Crown Resorts continues to have great faith in the long-term development of the Macau market. Macau remains the world’s most important and exciting gaming market over the longer term,” said Mr Rankin in Wednesday’s filing.

Crown’s thinking

In explaining the rationale for the proposed corporate restructuring, Mr Rankin said: “We believe that Crown Resorts’ extremely high quality Australian resorts are not being fully valued and the Crown Resorts share price has been highly correlated to the performance of its investment in Macau.”

In a filing to the Australian Securities Exchange in late February, Crown Resorts said that on a normalised basis – taking into account theoretical hold rates on casino gambling – its equity accounted share of Melco Crown profit was down 66 percent year-on-year. During the reporting period, Crown’s equity share in Melco Crown was higher than currently.

Under the proposed new arrangements for Crown Resorts’ business, Mr Packer would no longer be employed as an executive of Crown Resorts, but would continue as the deputy chairman of Melco Crown.

“I am fully supportive of the board’s decisions today,” Mr Packer said, as quoted by the Australian Financial Review newspaper on Wednesday.

“Crown is one of Australia’s most successful tourism and leisure companies and I am extremely proud of what we have achieved with our resorts in Australia, but also across Asia. This new corporate structure, well positions Crown for the next decade as we continue to grow our business and meet the needs of the emerging Asian middle class,” added the statement quoted by the newspaper.

Mr Packer, described in Australian media reports as 53-percent owner of Crown Resorts, had been considering – according to a media report in December – utilising his private investment vehicle, Consolidated Press Holdings Pty Ltd, to take private some of Crown Resorts’ casino assets.

Under the proposal outlined in Wednesday’s filing, Crown Resorts’ stake in Melco Crown would go into the new international holding company, along with Crown Resorts’ investment in Las Vegas casino and hotel Alon which is under development; its 20 percent holding in the the international restaurant and hotel company Nobu Hospitality LLC; its 50 percent stake in U.K. regional casino operator Aspers Group Ltd, and its stake in Caesars Growth Partners LLC.

Crown Resorts would retain the company’s casinos and hotels in Melbourne, and in Perth, Western Australia; and the hotel and casino under development in the Barangaroo district of Sydney, New South Wales. It would also keep Crown Aspinalls, in London, in the U.K.

Crown Resorts would also retain Betfair Australasia Pty Ltd; a 62 percent stake in online bookmaker Crownbet Pty Ltd; and 50 percent in Ellerston resort in the Hunter Valley, New South Wales.


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