James Packer (pictured), an executive director of Australian casino operator Crown Resorts Ltd, is in talks to take some of its casino assets into private ownership, reported Bloomberg News, citing people with knowledge of the matter.
The Packer family-founded Consolidated Press Holdings Pty Ltd – which according to a recent note by Credit Suisse AG has a controlling 53.1 percent stake in Crown Resorts – has been speaking with private equity firms and pension funds about a possible joint bid for some assets of Crown Resorts, according to Bloomberg. The financial information service said it had been asked not to identify the sources as the details of the talks were private.
Crown Resorts is publicly traded on the Australian Securities Exchange.
By Wednesday afternoon Crown Resorts’ shares were up 10.52 percent on the previous day’s close, to AUD11.77 (US$8.48), according to Bloomberg data. Year to date the shares have had a return of -7.25 percent.
The firm had a market capitalisation of approximately AUD8.57 billion as of Wednesday afternoon, indicated Bloomberg data.
Crown Resorts’ leveraging – its debt-to-earnings ratio – has recently been under scrutiny from the ratings sector and from some sell-side investment analysts.
JP Morgan Securities Australia Ltd referred in a note on October 21 to the Crown Resorts’ balance sheet being “full”. It said a proposed Las Vegas scheme from Crown Resorts would in likelihood require AUD1 billion in equity from the company barring any selling down of its interest in the scheme, while new construction at Crown Melbourne would require AUD500 million from the casino operator. JP Morgan added that the planned Crown Sydney at Barangaroo was a AUD2-billion development, with all debt on the firm’s balance sheet.
On October 29, Moody’s Investor Service Inc said the acquisition by Crown Resorts – for US$100 million – of a stake in international restaurant and hotel company Nobu Hospitality LLC was “credit negative”.
While Crown Resorts’ capital requirements remain robust, the returns on its investment in the previously high growth Asian casino sector have been declining.
In August Crown Resorts said its net profit for financial year ending June 30 was down 41 percent due to a slump in earnings from its Macau interests.
As of August Crown Resorts owned a 34.3-percent stake in Asian casino developer Melco Crown Entertainment Ltd, which on August 7 reported an 83-percent decline in net profit for the second quarter of 2015.
Crown Resorts nonetheless declared a half-franked final dividend for fiscal 2015 of AUD0.19 per share to shareholders.
Were Crown Resorts to move some of its assets into the private equity sector, it could help Mr Packer strip out costs and ride out the current leaner trading period without the distraction of scrutiny from the public markets, reported Bloomberg, quoting Evan Lucas, a Melbourne-based market strategist at IG Markets Ltd, a U.K.-based financial services firm active across the Asia Pacific region.
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China