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Simon Deloit June 3, 2019 3 min read
Melco Share Buy-Out in Crown Resort to Take 1 Year to Review
- Melco buys up part of owner’s share in Crown Resort
- Australia regulators to conduct a probity review for up to a year
- Melco will seek to consolidate its stake in the company after the review is over
Melco acquired a 19.99%-stake in Crown Resort on Friday, sealing a $1.2-billion deal. A year-long review will now determine if the move can get regulatory approval.
Melco’s Share Buy-up to Undergo a Review
The recent announcement of Crown Resorts stake buy-out by Melco Resorts & Entertainment sent ripples in the casino investment sector. Melco pushed with a final $1.2 billion bid to acquire a part of Crown Resorts on Friday, May 31, when founder James Packer agreed to seal the deal and sell to the Hong Kong-based operator.
Mr. Packer agreed to sell 19.99% of his share to Melco, which was nearly half of his controlled stake. Reacting to the news, Crown’s shares fell by 5% on Friday, which was their lowest since April 8. Meanwhile, Melco’s acquisition will not be finalized immediately, as Australian regulators will take their time to look into the deal up close.
The probity checks into Melco and the company’s Chairman and CEO Lawrence Ho could take up to one year, Asian iGaming industry experts wrote. Regulators will be homing in on a link between Mr. Ho and his father, Dr Stanley Ho.
Like Father Like Son
Australia will particularly focus on a 2014 agreement between Crown Resorts and the NSW Casino, Liquor and Gaming Authority, based on which, Dr Ho cannot have any association with any of the operations owned or ran by his son. Dr Ho is considered to be one of the founding members of the casino industry in the China-controlled region.
Checks will be initiated in Victoria, Western Australia and NSW where Crown Resorts has operations. Bank of America Merrill Lynch’s Melinda Baxter has said that the review could take up to a year to conclude. Baxter added that the deal also raised more questions about Crown’s future than it answered, but she saw a future for the company nevertheless.
Speaking to the Financial Review, Ms. Baxter elaborated further on why both Wynn and now Melco have sought to acquire the property:
“Crown gives a potential acquirer exposure to the defensive domestic gaming market through premium properties as well as a wider VIP network. Cost synergies, the ability to gear up Crown as well as the opening of Crown Sydney in 2021 make it attractive. While less likely, we also can’t completely rule out that Wynn returns to the table.”
UBS analyst Matt Ryan also discussed the deal, explaining that it should have a positive effect on Crown’s Australian operations and back up the company’s fellow casino operator, The Star Entertainment Group. Similarly, Ryan noted that shareholders had hoped for a full takeover, but a full corporate overtake is not yet off the table.
Melco Targets the Market Beyond Australia
While the interest in Australian gaming assets has grown among offshore operators, Melco is attempting to secure more financial heft and leverage its new-found clout to pry away a license for the upcoming Integrated Resort in Japan.
Meanwhile, Mr. Ho confirmed his company’s determination to buy up more of the remaining stake in Crown Resorts. “For Melco, once we clear through all the Australian regulatory hurdles, whether it is probity and foreign investment, we certainly have the appetite to increase our stake,” Mr Ho concluded.