Hong King-listed Melco Resorts & Entertainment is likely to complete its acquisition of 19.99 percent of Australia’s Crown Resorts—an acquisition that could lead to the outright purchase of Crown by Melco, say analysts at brokerage Sanford C Bernstein.
The New South Wales Independent Liquor & Gaming Authority will conduct an inquiry of Melco following reports alleging links between Crown and Asian crime syndicates and questioning the company’s relationship with junket operators. Those reports in outlets including the Sydney Morning Herald and The Age pointed out that Melco Chairman and CEO Lawrence Ho is the son of Macau casino kingpin Stanley Ho, who has often been associated with Chinese triads. In 2014, the NSW regulator forbade Crown from doing business with Ho, who is now elderly and unwell. But Lawrence Ho has been licensed in multiple jurisdictions despite his connection to Stanley.
In a research note, Bernstein analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu called the media reports “sensationalistic,” and added that denying Melco a license “would be unfortunate for both Melco and Australia’s gaming industry.”
Bernstein noted that, as partners in other ventures in Macau and Manila, Melco and Crown have already passed probity checks in NSW and Victoria. It also pointed out that the elder Ho’s alleged criminal ties have never been proven and he has not been convicted of a crime.
“Further, while Stanley Ho is still alive, he is completely out of the gaming business and is in full retirement,” the analysts said. “Stanley Ho has been pretty much out of the whole gaming picture since 2009 after suffering from a fall at home and being confined to a hospital for seven months thereafter.”
If the acquisition proceeds, according to Inside Asian Gaming, Bernstein anticipates that Melco will buy the remaining 26.8 percent Crown stake held by James Packer, which would give Melco 46.8 percent ownership. After that, Melco may be interested in acquiring the company outright.
“Assuming a full acquisition of Crown occurs, Melco will become a truly global and more diversified gaming company,” said the analysts, adding that the opening of Crown Sydney in 2021 could supplement Melco’s existing operations in the premium and VIP space.
It could also help by “enhancing Melco’s global branding in its bid for a Japan IR.”
