Crown Resorts has doubled down on its massive retreat from international operations after agreeing to sell another A$300 million of its stake in Macau casinos. It was announced Crown had reached an agreement to sell 40.9 million shares in Melco Crown Entertainment to institutional investors, in addition to the 98 million shares that are to be sold to its joint venture partner, Melco International Development.
Thus, the Melco Crown sell-off is brought to the total value of A$1.9 billion. Crown’s stake in this casino venture stood at 27.4% at the beginning of the week but will be reduced to 11.2% following the selldown’s completion. It was revealed the sale is to be arranged by Morgan Stanley, Deutsche Bank and Swiss global financial services company UBS.
The decision to leave the world’s largest gambling hub follows the October arrests of 18 Crown employees in China as a result of the Chinese government’s crackdown on corruption.
The money generated by the Macau selldown is to be used to pay down an A$800 million debt. The additional A$300 million, raised with the public share offer, will increase the distribution Crown plans to pay shareholders by A$100 million to A$600 million. The extra A$300 million will also boost the planned share buyback by A$200 million to A$500 million.
Australian billionaire James Packer, Chairman of Crown Resorts and its largest shareholder, is to collect A$288 million in special distribution money from the sale. The selldown marks the end of Packer’s plans to build and run a global casino empire.
The news of the Macau sale follows Crown’s announcement that its plans to build a casino resort in Las Vegas are to be put on hold after a comprehensive review of funding alternatives over the past two years. Crown unveiled plans to focus on growing its home-based casinos in Melbourne and Perth.
According to Theo Maas, at the Sydney-based Arnhem Investment Management, Crown’s decision to move away from the Asian markets has to do with risk management. Once Crown focuses chiefly on its home-based resorts, the business will become more predictable, with a stronger balance sheet.
Despite that, Crown’s retreat to the Australian market may prove to be risky. Reportedly one-third of Crown’s revenue at its Perth and Melbourne resorts is generated by international visitors, mostly mainland Chinese. However, the October arrests in China have rendered Crown’s ability to attract Chinese high rollers questionable.
Following the selldown announcement, Melco Crown’s shares in the United States dropped by 8.4% to $15.86. Crown revealed the Melco Crown public offer is expected to come to completion by December 20.
