Market likes the move; shares up
James Packer may be about to return some shares of his Crown Resorts Ltd. to private ownership, according to multiple reports. Bloomberg News last week reported that Crown shares “surged” on the news, jumping 14 percent in the immediate aftermath and closing up 10.5 percent at $12. Shares peaked at $18 in January 2014.
Sources close to the Australian billionaire said he’s been talking to private equity firms and pension funds about bidding for some assets of the publicly traded company, which has seen shares tumble by one-third since February. Crown, which operates casinos in Perth and Melbourne and is developing resorts in Sydney and Las Vegas, has taken a hit primarily due to the recession in Macau, where it is part of the Melco Crown Entertainment Ltd. joint venture.
“Macau has been a massive issue” for Melco Crown, which just opened a $3.2 billion resort on the Cotai Strip, said market analyst Evan Lucas of IG Ltd. in Melbourne. “It has been part of the reason Crown has suffered so badly. (Packer) is risk-mitigating the current situation. It’s an interesting move, and clearly the market likes it.”
Lucas told Bloomberg that dealing with private equity firms would enable Packer to cut costs and sidestep the kind of the negative scrutiny that dogs a public company, especially one that is struggling.
Despite the furor surrounding its Macau investments, as well as criticism that followed when Crown acquired 20 percent of Nobu Hospitality for $100 million, Crown shares are now undervalued, said Morningstar analyst Brian Han. If Packer wants to buy them back, he said, it would have “economic logic.”
Crown shareholder Arnhem Investment Management agrees. Partner Theo Mass told the Sydney Morning Herald that privatizing the casino operator makes “perfect sense” because its shares are undervalued. Mass valued the shares “at a minimum of $15,” reported the Herald.
“However you slice and dice it, it seems the market is giving a big discount on the assets Packer has collected over the years,” he said. “There is more value than the market is giving them. So there is a real disconnect there which is hard to ignore.”
The Reuters news agency reported that Packer owns 53 percent of the AU$8 billion (US$5.8 billion) casino company.
