Melco shelves $880m deal to boost Crown Resorts stake

Melco Group has abandoned its plan to double its stake in the Packer-backed Crown Resorts, blaming the impact of coronavirus.

Melco said it would not pursue its plans to increase its stake in Crown Resorts to 19.9 per cent. Picture: AFP

Hong Kong casino magnate Lawrence Ho’s Melco Group has abandoned its plan to double its stake in the James Packer-backed Crown Resorts, blaming the impact of the coronavirus epidemic.

In an announcement late on Thursday night, Melco said it was reviewing all non-core investments in 2020 due to the severe drop in tourism in Asia and the recent decision by the Macau government to close all casinos in Macau. This has put on hold its plan to spend another $880m to lift its stake in Crown to 19.9 per cent.

“This decision reflects Melco’s commitment towards its employees, customers, business partners and other stakeholders and observance of the highest degree of responsibility until such time as the global health emergency and the related travel restrictions that affect a significant part of its customer base are lifted,’’ Melco said.

“Melco considers its core operations to be those businesses where it is the managing and majority shareholder. This includes operations in Macau, the Philippines, and Cyprus and its efforts to obtain a license to operate a Melco-owned (integrated resort) in Japan”.

Melco said it intends to continue its operations in these jurisdictions and carry out key investments currently earmarked for Macau, Manila, Cyprus, and Japan, including the construction of Studio City phase 2 and City of Dreams Mediterranean.

“Management attention will remain focused on these critical areas of Melco’s business until such time as operations and business throughout Asia have returned to normal,” the casino operator said.

Crown shares were up 0.9 per cent at $11.71 in late morning trade, while Nasdaq-listed shares in Melco Resorts lifted 2.6 per cent to $US21.16 overnight.

In a statement on Friday, Crown confirmed it had received the terminated share sale agreement between Mr Packer’s private company CPH and Melco.

“Crown has been informed by CPH that CPH Crown Holdings Pty Limited and Melco Resorts have entered into a deed to terminate the obligations under the Share Sale Agreement regarding completion of the sale of the second tranche of Crown shares,” Crown Resorts said in a statement to the ASX.

Melco said it would not pursue its plans to increase its stake in Crown Resorts to 19.9 per cent, a transaction which is subject to an inquiry by the NSW gaming regulator, the Independent Liquor and Gaming Authority, due to begin later this month. It has also scrapped plans to seek a board seat.

“Melco does not currently intend to increase its existing shareholding in Crown from its current position”.

In June last year Mr Packer’s private company CPH received $880m in cash from Mr Ho’s Melco Group, the first tranche of the Hong Kong billionaire’s purchase of half of CPH’s shareholding in gaming company Crown Resorts.

CPH said in a statement on Thursday night that it and Melco had now entered into an agreement to terminate the obligations under the share sale agreement regarding completion of the sale of the second tranche of shares.

Crown is also currently facing inquiries by the Victorian gaming regulators and the Commonwealth Australian Criminal Intelligence Commission, following media reports last year detailing sensational allegations of the casino group’s links to organised crime.

Melco’s bid to increase its stake in Crown had also been clouded by reports at the end of January that it had been caught up in a widening Japanese bribery investigation.

On January 20, the Tokyo Prosecutor’s Office executed search warrants on the offices of Melco as part of an investigation of casino operators in the region.

Crown shares closed on Thursday at $11.61.