Lawrence Ho's Melco makes full retreat from Crown Resorts

Hong Kong gaming tycoon Lawrence Ho has sold his stake in Crown Resorts, ending a disastrous year-long attempt to gain a foothold in Australia's casino industry and raising speculation about future bids for the James Packer-backed company.

Almost a year after Mr Ho's Melco Resorts bought into Crown, Melco this week sold its 9.99 per cent stake to American private equity firm Blackstone at a loss of nearly $330 million.

Lawrence Ho agreed to buy a 20 per cent stake in Crown from James Packer in May last year.

Melco last year agreed to buy a 20 per cent stake in Crown from Mr Packer for $1.76 billion but only half of that changed hands, with the second tranche of shares put on hold after a NSW inquiry began probing whether Melco's involvement violated the conditions of Crown's Sydney casino licence. The inquiry is also exploring revelations that Crown went into business with Asian crime-linked tour companies as part of an aggressive push to attract ultra-rich Chinese high-rollers to its Australian venues.

Melco's decision to sell out at $8.15 a share compared to the $13 purchase price in June last year meant Melco took a $328 million loss.

Melco's sale comes amid a deep cost-cutting drive as the coronavirus crisis inflicts enormous pain across the casino sector in Melco's main Asian markets, gaming analysts said on Wednesday. Forcing the temporary closures of gaming rooms across Macau and confining top-end gamblers to their home countries, the pandemic has so far caused an estimated plunge in gambling revenue of more than 80 per cent in the region.

Macquarie analysts noted reports that Mr Ho had circulated a memo citing "devastating" business conditions due to coronavirus that could stretch into 2021. Mr Ho would not draw a salary for the year, the memo said, and there had been a clear-out of nine executives from the company's senior ranks including across gaming operations, retail and marketing.

News of Melco's withdrawal from Crown Resorts on Wednesday has renewed speculation about a future takeover play for the company potentially by Blackstone – which some market insiders suggested could seek to split off Crown's property portfolio – or by an international casino giant, given there was no longer the risk of Melco "being a blocker" to any takeover transaction.

Crown's shares closed up almost 11 per cent at $9.54.

Mr Packer has previously indicated his willingness to sell his 36 per cent holding in Crown during since-aborted talks with Las Vegas casino giant Wynn Resorts in April last year.

A spokeswoman for the NSW Independent Liquor and Gaming Authority inquiry into Crown – which began in January but was has been put on hold because of the pandemic – on Wednesday said it would be considering what adjustments would need to be made to the terms of the investigation.

The inquiry was to examine if Melco was an appropriate company to be involved in Crown's new casino under construction at Barangaroo, and if Crown's licence was breached when Mr Packer agreed to sell some of his shares to Melco. Mr Ho's father, Stanley Ho, and a string of related parties are banned from involvement in the casino because of long-standing allegations of links to organised crime. Lawrence Ho has always insisted his business is not connected to his father.

Melco said in a statement to the Hong Kong stock exchange that the sale was "an opportunity for the group to realise its investment in Crown Resorts at a market price", reallocate resources to its core casinos and strengthen its balance sheet which continues to be tested by COVID-19.

Melco received a $20 million dividend from Crown two weeks ago when the company decided to proceed with shareholder payments even as it stood down most of its staff without pay due to the coronavirus forcing it to shut its gaming floors, restaurants and bars.