NSW casino probe going ahead even as Lawrence Ho sells stake in James Packer’s Crown Resorts to Blackstone

Melco says the $551m stake sale will shore up its balance sheet amid the devestating impact of the coronavirus pandemic.

Billionaire Lawrence Ho, with James Packer in Macau in 2015. Picture: Bloomberg

Lawrence Ho’s Melco Resorts group says the $551.5m sale of its stake in the James Packer-backed Crown resorts will allow the group to strengthen its balance sheet and refocus on its core operations in the wake of the devastating impact of the coronavirus pandemic.

In a filing to the Hong Kong Stock Exchange on Thursday afternoon, Melco International Development -- the parent company of Melco Resorts -- said the disposal proceeds would be used for general working capital of the Group.

“The directors consider that the disposal is an opportunity for the group to realise its investment in Crown Resorts at a market price and to re-allocate the group’s resources to facilitate its core operations (including operations in Macau, the Philippines, and Cyprus) and to strengthen the balance sheet of Melco Resorts during the recent COVID-19 pandemic. The directors believe that the terms of the disposal were fair and reasonable and in the interest of the shareholders as a whole,’’ Melco International Development said.

The filing also noted it was estimated that the group would record a loss (exclusive of transaction expenses) of around $HK1.3bn, or around $260m, on its Crown investment for the financial year ending December 31, 2020

Meanwhile, the NSW gaming regulator has confirmed it will press ahead with its high-stakes inquiry into Crown Resorts, despite Hong Kong billionaire Lawrence Ho selling his 9.9 per cent stake in the company.

The Independent Liquor and Gaming Authority said it was aware of Mr Ho selling out of Crown and would consider making any adjustments necessary to its inquiry, which has been deferred until the coronavirus outbreak passes.

But a spokeswoman for the regulator said the investigation would continue.

“The authority and its casino inquiry will be giving consideration to the announcement and any adjustments that may be necessary regarding the ongoing work of the inquiry,” the spokeswoman said.

“As previously announced, most of the work of the Authority’s Casino Inquiry has been deferred in the current context of the COVID-19 epidemic. The Inquiry will continue when it is safe and practicable to do so.”

Nearly a year after Mr Ho’s Melco Resorts and Entertainment agreed to pay Mr Packer $1.76 billion for a 19.9 per cent stake in Crown in two tranches, it was announced on Wednesday that Melco had sold its 9.9 per stake in the Australian gaming group for $8.15 per share, crystallising a loss of more than $300m on its Crown investment.

Crown shares rose 12 per cent to $9.66 - their highest level since March 6 - following news of the sale.

The exit price compares to the $13 a share Melco paid for 9.9 per cent of Crown in May last year in a deal that reunited Mr Ho and Mr Packer, who had previously been business partners, when Mr Ho said he was interested in taking a controlling stake in the group.

Melco’s purchase of a second tranche of Crown shares was put on hold last year after the NSW gambling regulator launched an unprecedented public inquiry into probity issues around Crown and Melco, including whether the share sale breached the terms of Crown’s Sydney casino licence.

It now remains to be seen what comes of the NSW inquiry given Melco is expected to withdraw its application for probity approval.

James Packer, pictured in Melbourne in February. Picture: Aaron Francis

In February Melco announced it had decided not to go ahead with a deal to buy the second tranche of shares in Crown from Mr Packer worth $880 million because it needed to focus on its core business in Asia, which is being hit heavily by the coronavirus crisis.

Today’s sale is believe to be driven by Melco’s issues in its home market of Macau, where the industry is losing between US$1.5 million to US$4 million a day because of Chinese travel restrictions imposed in the wake of the coronavirus pandemic.

According to analysts JP Morgan, Macau’s gambling revenue could fall to near zero in April.

While Melco has a cash pile of more than US$1.3 billion it has substantial long term debt.

A fortnight ago Melco received a $20m dividend payment from Crown when the Australian casino company elected to proceed with its dividend payment despite standing down 95 per cent of its workforce due to government-imposed coronavirus restrictions.