Australian entrepreneur James Packer (pictured right) is to resign from his position as co-chairman of Asian casino operator Melco Crown Entertainment Ltd. It is part of a US$800-million corporate reshuffle that will see his family-founded Australian casino firm Crown Resorts Ltd reduce its stake in Melco Crown. Hong Kong-listed Melco International Development Ltd – headed by Lawrence Ho Yau Lung (pictured left) – will become Melco Crown’s single largest shareholder.
Following the changes, the Melco Crown board will comprise three Melco International nominees, two Crown Resorts nominees and four independent directors with Mr Ho, Melco Crown’s chief executive, and a current co-chairman, presiding as chairman.
Crown Resorts’ wholly owned unit Crown Asia Investments Pty Ltd will cut its stake in Melco Crown – also known by its stock short name MPEL – to 27.4 percent, from approximately 34.3 percent, Melco Crown said in a press release filed with Nasdaq on Wednesday.
Crown Asia will do so by allowing Melco Crown to repurchase from it 155,000,000 ordinary shares – equivalent to 51,666,666 American depositary shares (ADSs).
The aggregate purchase price is approximately US$800.84 million, representing a per share price of US$5.1667 (equivalent to approximately US$15.50 per ADS). The price per share represents a 1.6 percent premium to the closing price of the ADSs on Tuesday “and was agreed between the parties in consideration of prices and trading volumes of the ADSs in recent weeks,” said the release.
Melco Crown will pay for the share purchase using cash on hand. The repurchased shares will be cancelled “in due course” after completion of the transaction, said the release.
Prior to the transaction, Crown Asia owned approximately 559.3 million shares, or approximately 34.3 percent, of Melco Crown’s outstanding shares. Following the transaction, Crown Asia will own approximately 404.3 million shares, or approximately 27.4 percent of the company, and the shareholding in Melco Crown held by Melco International will increase to 37.9 percent. The share of Melco Crown owned by public shareholders will go up to 34.7 percent.
“It is expected that following completion of the transaction, Mr James Packer will resign from his position as co-chairman and will take up the position of deputy chairman of the company’s board of directors,” said the Melco Crown press statement.
“Mr Todd Nisbet will also resign as a director of the company,” added the statement, referring to Crown Resorts’ executive vice president, strategy and development, who additionally holds a seat on the Melco Crown board.
“The company’s free cash flow generation and strong balance sheet make this an opportune time for us to complete this transaction, which is consistent with the purpose of our existing share repurchase plan. Crown remains a major shareholder in the company and we look forward to continuing our relationship,” said Mr Ho in the statement.
“Crown is strongly committed to remaining one of Melco Crown Entertainment’s major shareholders,” said Rob Rankin, Crown Resorts’ chairman, in comments also contained in the statement.
“This transaction forms part of Crown’s ongoing capital management strategy,” added Mr Rankin.
In December Bloomberg News reported – citing people with knowledge of the matter – that Mr Packer, the controlling shareholder of Crown Resorts, was in talks to take some of its casino assets into private ownership.
Crown Resorts said in February that its first half fiscal results had been negatively affected by a slump in fortunes at joint venture Melco Crown. Crown Resorts said Melco Crown had experienced “weak market conditions in Macau”.
Melco Crown made a loss of US$12.3 million, or US$0.02 per ADS, in the fourth quarter of 2015 it said in a filing to Nasdaq in February.
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"If the [Macau casino] concessions are put up for bid, there will also be a lot of giant Chinese companies, some having nothing to do with gaming, which would like to take over these enormously successful casinos”
Professor emeritus at Whittier Law School in California, in the United States, and a visiting professor at University of Macau